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DEPARTMENT OF HEALTH AND HUMAN SERVICES

DIVISION FOR CHILDREN, YOUTH & FAMILIES

Jeffrey A Meyers 129 PLEASANT STREET,CONCORD, NH 03301-3857 Commissioner 603-271-4451 1-800-852-3345 Ext. 4451 Fax:603-271-4729 TDD Access: 1-800-735-2964 www.dhhs.nh.gov Joseph E. Ribsam, Jr. Director

July 2, 2019

His Excellency, Governor Christopher T. Sununu and the Honorable Council State House Concord, New Hampshire 03301

REQUESTED ACTION

Authorize the Department of Health and Human Services. Division for Children, Youth and Families, to enter into a sole source agreement with the President and Fellows of Harvard College, acting through the Taubman Center for State and Local Government at the Harvard Kennedy School Government Performance Lab ("GPL"), of 79 John F. Kennedy Street, Taubman Building, Third Floor, Cambridge, MA 01238, to provide intensive technical assistance to improve the delivery of child protection services, at no cost to the Department, effective upon the date of approval by the Governor and Executive Council through June 30, 2021.

The agreement does not.include funding information because GPL is providing the services to the Department at no cost to the State. The funding for GPL's work is supported in large part by Casey Family Programs as well as by other local and national philanthropic organizations. ^Casey Family Programs is providing financial support for GPL's work not only in New Hampshire but for similar projects in several states. GPL has estimated that the value of technical assistance provided through this partnership will be approximately $1.32 million dollars.

While this agreement is at no cost to the Department, the Department anticipates seeking approval in the future to enter Into a separate agreement with GPL to fund an additional research project or projects. The Department anticipates the cost of the research project to be $70,000 per year for two years. The Department will finalize and present this future item following the completion of the budget process for this biennium.

EXPLANATION

this agreement is sole ' source because the Harvard Kennedy School Government Performance Lab (GPL) proyides unique, intensive technical assistance to states to enhance child welfare and early childhood policies, programs and services. Since 2011, GPL has engaged in 89 government-side technical assistance projects with 65 jurisdictions spread across 30 states, using new data-driven public management tools to achieve better outcomes. Approval of this agreement will allow the Department to work with GPL to design and implement a variety of "Innovation Initiatives" to support New Hampshire's child welfare transformation efforts. "Innovation Initiatives" include improvements to procurement and contracting processes, use of data to inform service delivery and referral systems, piloting of new services or service-delivery models, establishing active contract management systems between governments and service providers, optimizing resource allocation, and other initiatives designed to improve government performance. His Excellency, Governor Christopher T. Sununu and the Honorable Council Page 2 of 3

The Department is seeking GPL's assistance to enhance the system serving at risk children and families to prevent maltreatment, reduce the need for children to be placed outside their homes and communities, and to create connections across the Department and the community to support families before crises occur. GPL will provide services to develop the Department's capacity to strategically use data, contracts, and provider management to better meet the needs of families and produce improved outcomes.

This Agreement outlines the roles and responsibilities of the Department and the GPL team, which includes Fellows, researchers, students, and staff affiliated with the GPL, and sets forth other arrangements between the Department and GPL relating to the assistance to be provided regarding the Innovation Initiatives. The Department's Division for Children. Youth and Families has had the assistance of an embedded Fellow since the summer of 2018. The two primary projects have focused on Central Intake policy and practice and conducting an extensive review of the foster parent recruitment, licensing and retention programs to make recommendations for improvements. Through this agreement, three additional Fellows will be added, one of which will be embedded in the Department's centralized Contracts Unit to improve how solicitations and contracts are written, organized, and managed to achieve desired outcomes. Additional assistance from GPL will include:

• Strengthening the Department's upstream prevention and child abuse hotline operations to improve community connections and reduce unnecessary assessments. This will involve continuing to support improved decision-making and operations at the hotline with data-driven adjustments to supervision, decision-support, and policy about which reports require child protection responses. It will also involve strengthening the use of data to more systematically make connections to primary prevention resources - such as family resource centers, family home visiting, early childhood, economic supports, and health and wellness care for families - for screened-out families and families looking for information on community-based programs.

• Building a voluntary services array focused on family-strengthening and other community- based resources that keep children safe in their homes and communities and prevent entry into out of home care. GPL will support the Department in proactively using case and population level data to assess and identify child and family's needs, align and monitor service plans, and improve service delivery in real-time. Additionally, GPL will support development and continuous improvement of a statewide continuum of locally designed and delivered prevention services, including a System of Care to preventatively respond to youth behavioral health care needs, family home visiting, and Family Resource Centers.

• Revamping management service strategies for open child welfare cases that enable children to be safely cared for in their families and communities. This will involve helping Department staff design, test and spread needs assessment, procurement, matching, and performance management approaches to key services across its in-home and out-of-home service continuum, including as-needed coaching to improve the capacity of foster care system. It will also involve building the Department's capacity to spread and sustain these management practices to its other program areas serving children and families through template materials, sample contracts, case studies, implementation manuals, and staff trainings.

Should the Governor and Executive Council not authorize this Request, the Department will miss out on an opportunity to develop and implement initiatives to modernize and Improve the delivery of services to New Hampshire's most vulnerable children. The Department's ability to better prevent child abuse and neglect, including fatalities, and to keep children safely in their homes and communities will be significantly diminished. His Excellency, Governor Christopher T. Sununu and the Honorable Council Page 3 of 3

Area served; Statewide.

Source of Funds: No state or federal funds. Philanthropic funds supporting this Agreement are provided directly, to GPL.

tfully sutimitted,

Jeffrey A. Meyers Commissioner

The Department ofHealth and Human Services'Mission is to join communities and families in providing opportunities for citizens to achieve health and independence Collaboration Agreement

This Collaboration Agreement ("Agreement"") is entered into as of July 1, 2019 between President and Fellows of Harvard College acting through the Taubman Center for State and Local Government at the Harvard Kennedy School ("Harvard") and the State of New Hampshire (the "State"), acting through the Department of Health and Human Services ("Agency").

The purposes of this Agreement are(A) to state terms regarding the engagement and role of a Government Innovation Fellows ("Fellows'!and any other Harvard Kennedy School Govemment Performance Lab ("GPL")researchers, students, scholars and staff who will assist the Agency in the development and implementation of Innovation Initiatives as described below; and (B)to set out other arrangements between the State and Harvard relating to the assistance the Harvard Team, as described below, will be providing to the Agency with regards to the State's Innovation Initiatives.

The "Harvard Team" means, collectively, persons from or afllliated with Harvard who provide services under this Agreement, including the four (4) Fellows, GPL Director Professor Jeffrey Liebman, other researchers, students, scholars and staff affiliated with the GPL, and other Harvard researchers.

"Innovation Initiatives" may include improvements to procurement and contracting processes, use of data to inform service delivery and referral systems, piloting of new services or service- delivery models, establishing active contract management systems between governments and service providers, pay for success and performance-based contracts, optimizing resource allocation, and other initiatives designed to improve govemment performance and make govemment programs more effective.

Effective Date: this Agreement will be effective as of July 1, 2019 or the date of approval by Govemor and Council, whichever is later.

The parties agree as follows:

1 • Responsibilities of Fellows. The Fellows will work with an Agency team in connection with Agency's analysis of and process for implementation of Innovation Initiatives. The Fellow's responsibilities will include general support for the Agency team; data collection and analysis and other technical support; preparation of briefing papers, reports, and procurement documents; and assisting in communications with responsible officials of the State and external stakeholders as appropriate. The Fellow and the other members of the Harvard Team will not provide, and are not-engaged or authorized-by-the State to provide,-legal advice or-serviccs, notwithstanding-that_ one or more may be trained as lawyers.

2. Supervision. Kimberly Crowe, a senior advisor at Agency as designated by the Agency, will give work assignments to the Fellows and generally supervise the Fellows' work at Agency. The advisor will provide mentorship and guidance to help support the Fellow's tasks, objectives, and professional development, and will provide objective feedback on the Fellow's performance. Professor Jeffrey Liebman of Harvard and other members of the Harvard Team will review and assist the Fellow with the Fellow's technical work. The advisor and a member of the Harvard Team will confer regularly on the Fellow's assignments and work. The Agency reserves the right to dismiss any fellow from the engagement with Agency at any time if the relationship is not mutually agreeable. If a fellow is dismissed. Harvard will not be required to provide a replacement.

3. No Salary and Benefits: Office Facilities. These fellowships do not establish an employee/employer relationship with the State. The State shall have no responsibility for compensation or employment benefits for the Fellow, Professor Liebman, or other members of the Harvard Team with respect to any work done pursuant to this Agreement. Agency will provide the Fellow with suitable office resources, including a desk, a computer, a phone, an email account, and appropriate access to Agency networks, servers, and printers. Agency will also provide access to general productivity software such as word and data processing and email programs. The Fellow shall sign and comply with the State's Computer Use Policy. Compliance with the Computer Use Policy is required only when the Fellow is using the State's computers/laptops; networks,-servers,-email programj-and printersr- — —

4. Status of Fellow. The Fellow will be treated as an intern unpaid by the State and shall be required to complete State training and other requirements for.persons in said status, including the following: (1) Prior to the start of the fellowship, the Fellow shall complete and return the State's Criminal Records Release Authorization Form, the Bureau of Elderly and Adult Services' (BEAS)State Registry Consent Form, and the Division for Children, Youth and Families (DCYF)Central Registry Name Search Authorization. The State reserves the right to reject any Fellow based upon the results of the background checks.

HKS GPL Agreement New Hampshire 2018-2020 (2) The Fellow shall attend orientation, which will include training on the State's policies, procedures and rules, including but not limited to quality assurance and risk management, fire and safety, emergency codes and the dress code.

5. Other Support. As agreed from time to time by Professor Liebman and the Agency advisor, Professor Liebman, supported by the Fellow and by other members of the Harvard Team as Professor Liebman judges to be appropriate, will, subject to the last sentence of this paragraph, (i) assist the Agency in policy analysis; (ii) assist the Agency in the preparation of requests for proposals and other materials for third parties with respect to their possible participation in financing of or furnishing services under Innovation Initiatives for the State, and provide other technical support; and (iii) when requested by the Agency, meet with such third parties to help explain the technical aspects of Innovation Initiatives. Agency agrees that, if members of the Harvard Team shall do work relating to any Innovation Initiative contract between the State and a third party, or at the request of the Agency communicate on the State's behalf with that third party about the Innovation Initiative, said Innovation Initiative contract will include as a contract term a limitation of liability of Harvard and the Harvard Team to the same effect as is set out in section 9. The Harvard Team may also, at its discretion and as a condition of providing services relating to said contract or said third party, require the third party to agree to such limitation of liability in a separate contract with Harvard.

6. Confidential Information. In order to provide services under this Agreement, the Harvard Team will need to participate in internal discussions among State employees, and view internal State documents and written communications, including, but not limited to, confidential information under NH RSA 170-G:8, but excluding information not exempt from disclosure under NH RSA 91 -A, that pertain to the Innovation Initiatives and the Harvard Team's services (such discussions, internal documents and written communications being hereinafter collectively referred to as the "Confidential Information").

All confidential information, including, but not limited to, individually identifiable health information shall be treated as confidential by the Fellow and all members of the Harvard Team in accordance with all federal, state or local laws and regulations governing the confidentiality and privacy of individually identifiable health information, including, without limitation, the Health Insurance Portability and Accountability Act of 1996(HIPAA) and any regulation and official guidelines promulgated thereunder.

HKS GPL Agreement New Hampshire 2018-2020 Prior to granting access to confidential information, the State shall ensure that the Fellow and relevant members of the Harvard Team have completed, signed, and returned the State's -Confidentiality Agreement;

6.1 Non Disclosure ofConfidential Information. Except as provided in Paragraph 6.2 below, the Harvard Team shall (i) hold the Confidential Information in confidence, and (ii) not at any time divulge, disclose, or communicate the Confidential Information to anyone other than State employees except as authorized by Agency, or use the Confidential Information for any purpose other than in connection with services under this Agreement. The Harvard Team will protect the Confidential Information by using the same degree of care, but no less than a reasonable degree of care, to prevent unauthorized disclosure or publication of the Confidential Information as the Harvard Team uses to protect Harvard's confidential information of a like nature.

6.2. Other Disclosure Provisions. Paragraph 6 and Paragraph 6.1 do not apply with respect to the Confidential Information that(a) was in the Harvard Team's possession before the effective date ofthis Agreement;(b) is or becomes a matter of public knowledge or publicly available other than through breach of this Section 6 by the Harvard Team; or(c) is disclosed by the Harvard Team with the prior written approval of a duly authorized representative ofthe State. In addition, the Harvard Team may disclose Confidential Information if such disclosure is required by any law, rule, regulation or judicial or administrative process, provided that, if permitted by applicable law or regulation, the Harvard Team shall notify Agency prior to any such required disclosure.

The State is subject to the requirements of RSA 91-A, Access to Governmental Records and Meetings,-and may receiye a request-for public disclosure of-information-related-to-this Agreement. To the extent permitted by law, the State shall not disclose the Harvard Team's confidential information that is exempt from public disclosure under RSA 91 -A:5, such as financial information, proprietary information such as research results and analysis, trade secrets, business and financial models and forecasts, and proprietary formulas. The State shall notify the Harvard Team if it receives a request for public disclosure under RSA 91-A regarding this Agreement and the Harvard Team shall have the opportunity to object to the release of the information requested.

7. Avoiding Conflicts of Interest. Members of the Harvard Team will not, at any time during the term of the Agreement, provide services to vendors or service providers in connection with transactions or proposed transactions with the State relating to the financing or implementation by the State of Innovation Initiatives that the Harvard Team advised on or assisted in developing. HKS GPL Agreement New Hampshire 2018-2020 ^ Members of the Harvard Team may at any time work with and advise other states, counties, municipalities or government agencies that are undertaking similar Innovation Initiatives, including other jurisdictions that may be applying for the same federal grants that the State may be applying for. Members of the Harvard Team may also advise the U.S. federal government and governments in other countries on strategies to advance similar Innovation Initiatives. 8. No Authority. Professor Liebman, the Fellow and any other members of the Harvard Team will have no authority to negotiate any agreements for the State, to incur any obligations or expenses on behalf of the State, or to act in any other manner on behalf of the State or in its name.

9. Limitation of Liability. The State acknowledges that performance of the work described in this Agreement will involve the expression of professional ideas,judgments and opinions by the Harvard Team, and that it is in the State's interest to have such ideas,judgments and opinions expressed frankly, without concern on the part of the Harvard Team or Harvard that such ideas, judgments and opinions will be deemed representations, warranties or covenants upon which the State may claim reliance. The State further acknowledges that the Innovation Initiatives are relatively new, little-used and little-studied tools. Accordingly, the State understands and agrees that the Harvard Team and Harvard do not and will not make any warranties or representations of any kind, express or implied, concerning the accuracy of ideas,judgments, opinions, recommendations, projections, analyses or estimates which any member of the Harvard Team provides to the State under this Agreement (collectively, "Contributions"V The State further agrees that (i) any decision the State may make to rely on any Contributions shall be at its own risk; and (ii) neither Harvard nor any member of the Harvard Team shall be liable to the State for, and the State shall not make any claim against Harvard or any member of the Harvard Team relating to, any claims, liabilities, losses, damages, costs or expenses of any kind (including attorneys' fees) which State may at any time sustain or incur in connection with or arising out of any Contributions or the State's reliance thereon or use thereof, other than claims, liabilities, losses, damages, costs and expenses resulting from the gross negligence or intentional misconduct of any member of the Harvard Team. This agreement shall not be construed to limit the State's assertion of any right to sovereign immunity, including without limitation, exercise of discretionary executive or planning functions of the Agency. Without limiting the foregoing, in no event shall the State or Harvard or any member of the Harvard Team be liable for any indirect, consequential, exemplary or punitive damages whatsoever in connection with claims arising under or relating to this Agreement, whether based upon a claim or action of contract, warranty, negligence, strict liability, or any other legal theory or cause of action, even if advised of the possibility of such damages.

HKS GPL Agreement New Hampshire 2018-2020 lO-Tntellectual-Propertv-and-Publication-Rights

10.1 Work Product and Harvard Created Materials.

The term Work Product as used herein comprises works subject to copyright, including materials, notes, designs, technical data, methodologies and know-how, research findings, reports, documentation, and other similar work product in any media or formats.

The State shall retain sole ownership of all rights, title, and interest, including all copyrights and other intellectual property rights, in and to Work Product developed or acquired by the State or on the State's behalf either prior to this Agreement or under this Agreement without the active participation of the Harvard Team.

Harvard shall be the sole owner of all rights, title, and interest, including all copyrights and other intellectual property rights, in and to the Work Product conceived, created or provided by Harvard or the Harvard Team under this Agreement ^'Harvard Created Materials"), whether alone or with any contribution from the State or its personnel. To the extent the State or its personnel may acquire any right or interest in such Work Product by operation of law, the State hereby irrevocably assigns all such right and interest exclusively to Harvard.

In connection with the State's pursuit of its public purpose, Harvard hereby grants to the State a fully-paid, royalty-free, non-exclusive, worldwide, irrevocable, perpetual, assignable license to use, reproduce, distribute, modify, transmit, and sublicense the Harvard Created -Materials in-any media now knovm or-hereafler developed. - .

The State understands and accepts that Harvard intends to share Harvard Created Materials and related analytic concepts and tools with other jurisdictions in connection with their Innovation Initiatives.

10.2 Publication Rights. In addition to providing assistance and support to the State, a main purpose of this Agreement for Harvard is as an opportunity to research, study, learn more about and make publicly known the design and implementation of Innovation Initiatives. Accordingly, Harvard and any member of the Harvard Team shall have the right to use, publish, and present publicly any findings, analyses, data and opinions based on or derived from Harvard Created Materials, from Contributions or from other work performed under

HKS GPL Agreement New Hampshire 2018-2020 ^ this Agreement; provided that no Confidential Information shall be disclosed in such publications or presentations without the consent of the State. The Harvard Team shall provide Agency with an opportunity to review any such materials at least 30 days prior to submission for publication or presentation for the purpose of identifying any Confidential Information that is contained therein and should be removed; Agency shall perform such review within 30 days of receipt. Publications and presentations of general conclusions and analyses drawn from work with multiple jurisdictions and publications and presentations that summarize publicly available information about the State's initiatives do not have to be submitted for review.

11. Term and Termination. This Agreement will expire on June 30, 2021. Either party may terminate this Agreement upon 30 days' written notice to the other party. The provisions of this Agreement concerning confidential information, limitation of liability, intellectual property and publication rights, and publicity and use of names shall survive expiration or termination of this Agreement.

12. Publicity and Use of Names. Neither party may issue a press release or other public announcement about this Agreement, nor may it use any name, trademark or insignia of the other party (or of any school, department or unit of the other party) for promotional purposes or any other public purposes in connection with this Agreement, without the prior-written approval of the other party. Without limiting the foregoing, neither party shall in any manner suggest that its programs, findings or publications have been endorsed by the other party. However, each pa^ may identify the other in any description of the Agreement in its customary .listings of activities; Harvard and the Harvard Team may identify the State and the Agency in publications about the Innovation Initiatives as described in Section 10.2; and the GPL may state on its website that it is assisting the State.

13. Other Provisions.

(a) Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New Hampshire (excluding conflict of laws rules).

(b) Severabilitv. In the event that any provision or section of this Agreement shall be held to be invalid by any court, such holding shall not affect in any respect whatsoever the validity of the remainder of the Agreement unless the invalid provision materially affects the rights of the parties.

HKS GPL Agreement New Hampshire 2018-2020 (c) Notices. Any notice under this Agreement may be given in person, or sent by fax, by electronic mail, by registered or certified mail, postage prepaid, or by recognized delivery service, to a party's address given from time to time by such notice, and such notice shall be deemed to have been given when so delivered, sent by fax or electronic mail, or mailed.

(d) Force Maieure. Neither party shall be liable for any delays or failures in performance due to circumstances beyond the party's reasonable control.

(e) Entire Agreement: Amendment. This Agreement constitutes the entire agreement between the parties with respect to the Innovation Initiatives which are the subject matter hereof, and supersedes all prior or contemporaneous agreements concerning such matters. This Agreement may not be amended or modified except with the written consent of both parties.

(f) This Agreement hereby revokes and replaces the prior Agreement between the parties dated June 1, 2018.

Executed as of the date first stated above.

For the State of New Hampshire, For President and Fellows of Harvard acting through the Department of Health College acting through the Taubman Center and Human Services for State and Local Government at the Harvard Kennedy School

By:5^rey A. Meyers ly: Matthew Alp^r Title: Commissioner, DFIHS Title: Associate Dean, HKS

HKS GPL Agreement New Hampshire 2018-2020 The preceding Agreement, having been reviewed by this office, is approved as to form, substance, and execution.

OFFICE OF THE ATTORNEY GENERAL

Date:I'• r Name. / a ^ Title: S>.

I hereby certify that the foregoing Agreement was approved by the Governor and Executive Council of the State of New Hampshire at the Meeting on: (date of meeting)

OFFICE OF THE SECRETARY OF STATE

■i

Date Name: Title:

HKS GPL Agreement New Hampshire 2018-2020 HARVARD Kennedy School JOHN f. KENNEDY SCHOOL OF GOVERNMENT

Delegation of Signing Authority - Government Performance Lab

In my capacity as Executive Dean of the Harvard Kennedy School, 1, Janney Wilson, delegate to Matthew Alper, Senior Associate Dean for Research Policy and Administration at the Harvard Kennedy School, the authority to execute Memorandums of Understanding and similar agreements for technical assistance and related programs to be performed by the Harvard Kennedy School Government Performance Lab.

SIGNATU

DATE

Last updated: June 2019 ■y . ■• ■■■»

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!■ nP^tl;|U III Ip^l.BjiipB a|a' •VJ ^•!B"|bRplD| 2 MESSAGE FROM THE PRESIDENT

3 FINANCIAL OVERVIEW

8 A LETTER FROM THE PRESIDENT AND CEO

OF HARVARD MANAGEMENT COMPANY

11 REPORT OF INDEPENDENT AUDITORS

12 FINANCIAL STATEMENTS

16 NOTES TO FINANCIAL STATEMENTS Message from the President

I am pleased to submit Harvard University's financial than 153,000 households in 173 countries gave results for fiscal year 2018. gifts to the University to support our education and research mission, with some $i.3.billion devoted to My presidency began on July i, 2018, so my reflections financial aid. Academic programs were established are offered with.admiration for my predecessor, Drew and expanded across our schools, and 142 endowed Gilpin Faust, whose many achievements strengthened professorships were funded to advance the work of our the University and set it on a course for continued faculty. At the same time, our physical campus was success. 1 am extraordinarily grateful to have taken improved in ways that will drive progress and create the reins of an institution that thrived under her community for many years to come. leadership—an institution driven by enduring principles and values. Alumni and friends around the world have invested in Harvard because they have confidence in the When 1 addressed the higher education community University's mission. One of the ways in which we at my inauguration on October 5, 1 spoke about some honor that confidence is through the prudent and of the values that 1 see as the heart of the University: thoughtful use of our resources. It is impossible for truth, excellence, and opportunity. Through the any new president to anticipate the exact challenges relentless pursuit of knowledge and the cultivation he or she will face, but I can say with certainty that of wisdom, we advance human understanding challenges are on the horizon. Our ability to respond in a multitude of fields and disciplines. Through and adapt to changing circumstances will enable us to constant effort to attract the most talented individuals continue seizing opportunities, and I very much look to our campus, we enable the aspirations and forward to undertaking that important work with you. accomplishments of remarkable students, faculty, and staff. And through a deep commitment to keeping All the best, the American Dream alive, we fulfill our obligation to young women and men who seek to improve their lives—and the lives of countless others—through education.

For these reasons, the financial report is so much Lawrence S. Bacow more than the sum of its quantitative parts. It is the PRESIDENT story of all that we do as a community to enable and advance our mission. On June 30, we concluded an October 25, 2018 outstanding fundraising campaign. All told, more Financial Overview From the Vice President for Finance and the Treasurer

The University's financial performance in 2018 was With only 22% of revenues coming from net tuition. solid, with revenue rising to $5.2 billion based on Harvard's annual funding is deeply dependent upon 4% growth, an operating surplus of $196 million, its generous donors with 44% of annual revenues and endowment returns of 10%. Consequently, the arising from donations, past and present: endowed net assets of the University, the most fundamental distributions represent 35% of revenues and current- measure of resources, increased this past year by year gifts represent 9% of revenues. The success of $3 billion from $44 billion to $47 billion. This the Capital Campaign has been broadly reported 7% increase in net assets is primarily driven by elsewhere, but we add our thanks as well to Harvard's endowment returns and gifts, which enable the thoughtful donors. From a financial perspective, University to continue to advance in teaching philanthropy is the critical driver of the excellence to and research. which Harvard aspires in transformative teaching and

I ground-breaking research. These results were achieved through considerable care in managing resources throughout the University as The operating surplus of $196 million equaled evidenced by an increase in operating expenses of 3.8% of revenues, a comparable percentage to other less than 3% during the year. Careful management AAA-rated universities. Generating a surplus is of resources is necessary for Harvard, as it is for all helpful as it will add a small cushion to reserves in colleges and universities, in the current environment. preparation for an inevitable economic downturn,, In last year's letter, we commented that higher particularly in light of the current extended economic education has matured as an industry. Revenues expansion—one of the longest in history. At Harvard, are under pressure as the number of students most reserves are managed locally as every school has plateaued, tuition costs have reached limits of and unit within Harvard is accountable for its own affordability, federal research support is uncertain, and budget results, with local control over resources and expectations for returns in the investment markets decision-making. Consequently, the $196 million are muted. For these and other reasons, Moody's and surplus is the consolidation of individual school and Standard & Poors both issued within the last year a unit results — some with surpluses and others losses. "Negative Outlook" for higher education in the U.S. As one example, the Faculty of Arts & Sciences (FAS), Harvard's largest individual enterprise, showed a Harvard is well positioned to manage through this surplus of $3.1 million this year, overcoming several period due to a healthy balance sheet, modest recent recent years of operating losses thanks to sustained operating surpluses, established financial discipline, and careful stewardship. and Harvard's primary strength — faculty and staff—who create one of the world's most exciting The passage of the Tax Cuts and Jobs Act adds a new learning and research environments. Nonetheless, the series of tax cost burdens to the University. We believe University is cognizant of economic pressures, and the provisions applying to higher education are bad recognizes its obligation to our students, donors, and public policy. Our country's philanthropic history research sponsors to ensure that every dollar under has helped create leading universities, hospitals, and University stewardship is efficiently and effectively social service agencies that serve our communities in managed in support of our teaching and research ways that are the envy of the world. The step of levying mission. We thank our faculty and staff for wisely a federal tax on public good, non-profit charities is managing resources over the past year. deeply concerning as it reduces the money available for the underlying missions of these organizations, With Drew Faust having stepped down as President at and establishes an unsound precedent for other levels the end of the fiscal year, we would like to thank her of government. The Act has added several new tax for her farsighted financial stewardship—especially burdens on the University, the largest of which is a during times of financial constraint. During President new tax on endowment income. Although we do not Faust's tenure, the Corporation Committee on Finance have final guidance from the U.S. Treasury, we have was established, consistent budgeting practices were estimated that these related provisions will ultimately installed across the campus, decision-making has cost the University $40-$50 million on an annual been guided by new multi-year financial and capital basis. This policy will increase the cost of education planning processes, and clear policies have been and damage the University's teaching and research created with respect to University liquidity, operating mission. In Harvard's case, the tax is approximately reserves, philanthropy for capital, and facilities 25% of this past year's undergraduate financial aid renewal spending. Through both her championing grant budget. We believe these dollars are better spent of sound financial practices and her leadership role enabling our educational mission. in the success of the Capital Campaign, President Faust's legacy of financial stewardship will benefit the Student aid this past year enabled one out of five University for generations to come. undergraduates to receive 100% of their tuition, room and board paid by the University, as they come from In closing, we want to again thank each and every families with annual incomes of less than $65,000. donor to the University—past and present—for Across the student body, 54% of undergraduates understanding that Harvard's excellence in receive financial aid. and on average their families paid teaching and research is made possible through $12,000 for tuition, room and board. The University your philanthropy. We also want to thank Harvard's hopes to continue this level of affordable access to a faculty and staff for their vital contributions, on a Harvard education for students. daily basis, in making Harvard one of the world's preeminent institutions. As mentioned above, the endowment earned a 10% return for the year. This is gratifying as it is 2% above our 8% long-term target return. Similar to recent years, this result is roughly equal to the average return of larger college and university endowments, but not yet our immediate peers. We are very encouraged by the steps that Narv Narvekar and his Harvard Thomas J. Hollister Management Company colleagues have taken to VICE PRESIDENT FOR FINANCE reposition the endowment for long term success, knowing that the positive impact of these changes will take time to unfold.

Paul). Finnegan

TREASURER

October 25, 2018 FINANCIAL OVERVIEW The University ended fiscal year 2018 with an 0%. In the aggregate. Harvard's endowment payout operating surplus of $196 million compared to an rate {i.e., the dollars withdrawn annually for operations operating surplus of $114 million in fiscal year 2017. as a percentage of the endowment's prior year-end The University's net assets increased by $2.9 billion market value) was 5.2% compared to the 5.3% payout to $47.0 billion at June 30, 2018, due to investment rate in fiscal year 2017 and in line with the University's returns on the endowment, generous campaign targeted payout rate range of 5.0-5.5%. contributions, and a disciplined focus on expenses. In the final year of the Capital Campaign, record OPERATING REVENUE totals in current use giving are driven by continued Total operating revenue increased 4% rising to generosity of donors, as well as payments from donors $5.2 billion. The largest drivers were growth in fulfilling their earlier campaign promises. Gifts for executive and continuing education, non-federal current use were $467 million in fiscal year 2018, sponsored support revenues, the annual endowment while total cash receipts from giving, including gifts distribution and current use giving. designated as endowment, grew to $1.4 billion (see Note 15 of the audited financial statements). The In fiscal year 2018, the endowment distribution University is the grateful beneficiary of a renewed increased 2% to $1.8 billion. This growth was mainly level of giving and generosity that we hope continues the result of the impact of new gifts, given that the beyond the campaign years. Corporation-approved distribution rate increase was

FISCAL YEAR 20l8 SOURCES OF OPERATING REVENUE

Univtrsity Endowment income mode availablefor optrotior\s ^ Student income □ o Major oeadtmie units Sponsored support ^ Cifisfor current use ^ Other

14% 17%

30* 32%

6%

23% 19% 22%

45* 42%

zt%

27% 24% 41% 29% 9*

10% 36* 33* 33*

24% 2s* <9% 18% 17*

University Radciifte Divinity Faculty Engineering Law' Design Medicine Kennedy Education Oentai Business Public of Arts & & Applied Schooi Health Sciences Sciences In aggregate, revenue from federal and non-federal by favorable claims experience and a change in the sponsored sources increased by 3% to $914 million discount rate at the end of fiscal year 2017 related to in fiscal year 2018. Federal funding, which accounted post-retirement and defined benefit costs. for approximately 68% of total sponsored revenue in fiscal year 2018, increased r% to $625 million. The FISCAL YEAR 20l8 OPERATING EXPENSES University's relationships with foundations and other In millionf ofdollars non-federal sponsors expanded in fiscal year 2018, Scholarships & other resulting in an 8% increase in non-federal sponsored Student awards Sija revenues to $289 million. Supplies & equipment S268 Interest S)88

Net student revenue increased approximately 6% to Depreciation $358

$1.1 billion in fiscal year 2018, mainly driven by 12% Salaries, growth in revenue from continuing and executive Space & wages,& employee occupancy S411 education programs. The University continues to benefits $2,513 experience rising demand for expanded program offerings across the University, which contributed to Other expenses $512 the anticipated growth in continuing and executive education. Net undergraduate and graduate tuition Services purchased increased 3% with net undergraduate tuition S617 contributing 2% growth due to the University's steadfast commitment to undergraduate financial aid. TOTAL OPERATING EXPENSES $5,019

OPERATING EXPENSES Total operating expenses increased by 3% to BALANCE SHEET $5.0 billion. Compensation expense (i.e., salaries, investments wages and benefits), which continues to represent half In fiscal year 2018, the return on the endowment was the University's total operating expense, increased 10% and its value (after the net impact of distributions 2%, exceeding $2.5 billion. Salaries and wage expense from the endowment for operations and the addition grew 3% and employee benefits costs remained flat of new gifts to the endowment during the year) compared to fiscal year 2017. Non-compensation increased from $37.1 billion at the end of fiscal year expenses increased by 3%, which includes a $15 2017 to $39.2 billion at the end of fiscal year 2018. million or 7% savings in interest expense. More information can be found in the Message from the CEO of Harvard Management Company, found on Salaries and wages increased by 3% or $58 million to page 8 of this report. $1.9 billion in fiscal year 2018 due to the University's merit increase programs, as well as additional faculty The University has a policy of maintaining a cash and staff for strategic areas of focus within academic reserve floor held outside the General Investment and research programs. Account (CIA) of $800 million. The University continued to hold liquid investments (e.g., cash and Employee benefits expense remained flat from fiscal treasuries) outside of the GIA consistent with policy year 2017 at $569 million. Active employee health as of June 30, 2018. These investments are primarily expense increased 4% due to higher medical claims included in other investments as presented in Note 3. costs as well as plan enrollments. Defined contribution pension expense increased for active employees in line with salaries and wages. These increases were offset MARKET VALUE OF THE ENDOWMENT AS OF jUNE 30, 20l8 experience and an increase in the discount rate used In millions ofdollars to calculate the obligation for both the pension and postretirement plans. Other $3,328 Dental $213 Design $300- Capital Expenditures Education S6)i Radciirfe Institute $644, The University invested $908 million in capital Divinity S637 projects and acquisitions during fiscal year 2018. Kennedy School $1,236 Engineering &. Applied compared to $906 million in fiscal year 2017. This Sciences $>,317 Faculty of Arts U enabled significant progress on several noteworthy Public Health $1,638 Sciences $16,008 projects, including: Law $1,982 • Ongoing and finalization efforts to transform the University professorship $332 Smith Campus Center, which opened in the Fall 2018, to support the University's goal of creating President's fundsX/ $2,497 new and programmable common space for the entire

Business community: $3,787 Medical $4,242 • Completion of Winthrop House and continued renovation of Lowell House for the undergraduate TOTAL MARKET VALUE $39,234 long-term house renewal initiative; • Ongoing construction activities for the Allston Debt Science and Engineering Complex, District Energy Bonds and notes payable decreased modestly from Facility, and related infrastructure work, which $5.4 billion at June 30, 2017 to $5.3 billion at June will anchor an innovation area that will lead to the 30, 2018, resulting from a scheduled maturity of development of an enterprise research campus, Series 2009A and a reduction in outstanding taxable combining science and engineering innovation with commercial paper. In fiscal year 2018, the University's business expertise; interest expense decreased by $15 million, a result of the full-year impact of the October 2016 debt • Multi-year phased renovations to the four-building refinancing, interest expense was $252 million in Soldiers Field Housing Complex, which will update fiscal year 2015 and was $188 million in fiscal year and reconfigure graduate student units to meet 2018 with the majority of the decrease resulting from current housing requirements; the refinancing. The average interest rate on the debt • Completion of Harvard Business School's Klarman portfolio was 4% for fiscal year 2018. Hall, which can accommodate activities ranging from intimate community forums up to large-scale The University is rated AAA by S&P Global Ratings events for approximately 1,000 individuals; and (re-affirmed in November 2017) and Aaa by Moody's • Completion of the Kennedy School's transformative Investors Service (re-affirmed in December 2017). Pavilions project, which includes expansion, new Additional detail regarding the University's debt buildings and a raised, pedestrian-only courtyard. portfolio can be found in Note n of the audited financial statements. This concludes the summary of the key financial highlights for fiscal year 2018. We encourage you to Accrued Retirement Obligations read the audited financial statements and related notes The University's accrued retirement obligations for more information regarding the financial position decreased by $109 million or 10% to $984 million and results of the University. at June 30, 2018. The primary driver of the decrease was an improvement in postretirement claims Harvard Management Company,inc. Message from the CEO OCTOBER 2018

i IDear Members of the Harvard Comniuaity, For the mosr'recenc fiscal year ended June 30,2018, the return on the Harvard endowment was 10.0% and the value of the endov\mienr was $39.2 billion. Tlie gain was primarily driven by private equit)' and public equity exposures. The endowment also distributed more than $1.8 billion toward the University's operating budget.

Performance

Asset Class 1 July 1, 2017 Allocation HMC Return 1 Public Eauity ' 31% J1 14% } Private Eauitv 16% z1 21% —1 1 Hedae Funds ..J 21% z1 6% j Real Estate □ 13% z 1 9% i Natural Resources 6% r (2)% i i Bonds^lPS II 8% □[ 1% 1 [_^Other Real Assets & Private Debt* □ll ■ 2% . • Jj (1)%' ' 1 1 Cash "1iP 3% ni 0% 1 t Endowment J1 100% JL_ 10% 'This group comprises residual private investments of the former pubiic Internal p^tform, excluding natural resources. It also ifKhJdes non-private equity investments of the former private equity silo.

While we are not pleased with this performance, we are mindful that ours is an organization and a portfolio in transition. A quick look at our asset group returns makes t\vo issues dear. First, there are certain parts of the portfolio that need work. We understand this shortcoming extends beyond a single year's performance and arc hard at work to improve those asset classes for the future, as wc are working to improve every part of the portfolio and will always do so. Second, looking beyond the returns of individual asset classes, asset allocation — or risk level—was the dominant factor in the overall returns, in general, the higher the risk level, the higher the return. All of this said, as sophisticated investors well know, there are very limited conclusions that we coin draw from a single year of either manager performance or asset allocation. Indeed, such superficial focus can lead to unwise or even dangerous conclusions. Had this past year's return been significantly higher or lower, it still would not be reflective of the work we are undertaking, nor change the path we are pursuing. Tliis is a realit)' that will apply to the remaining years of our transition as well. As I told HMG's Board prior to accepting this position and have stated in previous letters, the significant changes we are undertaking require a five-year timeframe to reposition the organization and portfolio for subsequent strong performance. At the close of this past fiscal year, we were 19 months into the execution of the plan and we remain focused- on implementing that strategy. Review of Progress ' High-quality people, culture, and investment processes drive top long-term returns,just as they did at the endowment I previously led. Short-term returns should never drive long-term strategy. Accordingly,in addition to our focusing on'the portfolio, significant attention is paid to our people, culture, and processes. Since I have discussed those at length in the past,I will not belabor them here. Rather,I will provide a brief update on what we have done to progress organizationally.

Internal Pla^orm • Early in fiscal year 2018, wc spun-put two relative value platforms, supporting both with investment. • As was well pubUci'/xd, wc spun-out our large internal real estate platform to Bain Capital. Wc arc pleased that the former HMC real estate team is now at Bain and that they continue to manage a sizable pool of capital on HMC's behalf. • This past spring, we also spun-out our credit platform, supporting it with investment. • lEe natural resource team is now the sole internal platform at HMC.This team has made great progress in their multi-year repositioning of the portfolio, selling certain assets and improving the manageriient of others.

The Generalist Team The HMC Generalist Team was officially formed just prior to the start of fiscal year 2018 and has, therefore, been functioning for over a year. While some team members have been trained as generalists, others bring deep specialist experience.The investment framework and accompanying anal)tics we are developing ser\'e as our common language. While it will natur^y take a fcwycars'for talented specialists to develop fully as generalists,our early progress has exceeded my expectations. Furthermore, HMC's investment and organizational cultures are evolving to foster the kind of internal discussion and debate needed to support thoughtfiil investment decisions.

Critical Frameworks • We have developed our fundamental investment framework and completed most of the accompanying analytics. We continue to evolve and improve them, as we alw-ays will. • Our portfolio liquidity^ framework was developed over the course of fiscal year 2018 and plays a critical role in our management of the portfolio. Importantly, we are now engaged in highly collaborative and deep discussions with Harvard's vice president for finance,Tom HoUister, his colleagues, and the HMC Board to ensure that we best serve Harvard's needs. • Our risk framework was completed over the course of fiscal year 2018. As planned, it provides an important guidcpost for our portfolio. Wc will soon engage the HMC board of directors in conversation to determine Harvard's risk appetite. Based on past experience, 1 would expect this to be at least a two- year exercise. Looking Ahead ^ While my first 19 montlis at HMC have featured some unkind surprises, there.has been one especially welcome discovery: HMC has an extraordinarily talented, skilled, and dedicated team on both the investment and support sides. If I could pick the one asset on which to build an organization, this would be it. It is therefore our opportunity, our obligation^ and well within our capacity to eflect this turnaround and generate long-term success for Harvard. '• I often hear the opinion that HMC's endowment is too large to generate attractive returns, but as peer endowments with similar assets under management have shown, the size of the.endowment is no excuse for muted returns.

As 1 have stated before, we arc in the midst of a five-year transition. Developing our investment team into gcncraiists, building the systems to support our investment framework, and repositioning the portfolio — reducing exposure to certain illiquid assets, while building exposure to others — takes years to complete. We are constantly looking to evolve and improve, but the basic plan has not and will not change, "^fherefore, observers should not expect future letters to recount dramatic changes. Our work continues apace to position HMC for long-term success and ensure that Harvard University has the means to continue its vital role as a leader in teaching and research for future generations.

Best regards.

N.P."Narv"Nan'ekar Chief Executive Officer pwc

Report of Independent Auditors

I To the Joint Committee on Inspection of the Governing Boards of Harvard University: We have audited the accompanying consolidated financial statements of Harvard University (the "University"), which comprise the consolidated balance sheet as of June 30, 2018. and the related consolidated statements of changes .in net assets with general operating account detail, changes in net assets of the endowment and of cash flows for the year then ended.

Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We 11 conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated ^ financial statements are free from material misstatement. ^

2 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the = consolidated financial statements. The procedures selected depend on our judgment, including the assessment of | the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making > those risk assessments, we consider internal control relevant to the University's preparation and fair presentation of ^ the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the University's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a' basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Harvard University as of June 30, 2018 and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matter We previously audited the consolidated balance sheet as of June 30, 2017, and the related consolidated statements of changes in net assets with general operating account detail, changes in net assets of the endowment and of cash flows for the year then ended (not presented herein), and in our report dated October 26, 2017, we expressed an unmodified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying summarized financial information as of June 30, 2017 and for the year then ended is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

U/'

October 25, 2018

PricewaterhouseCoopers LLP,loi Seaport Boulevard, Suite 500, Boston, MA 02210 T:(617) 530 5000, F:(617) 530 5001, www.pwc.com/us BALANCE SHEETS with summarizedfi nancial information as ofJune 30, 3017 )une30 In thousands ofdollars 2018 2017

ASSETS; Cash $ 144,982 S 139,896 Receivables, net (Note s) 301,258 261,841 Prepayments and deferred charges 130,925 130,701 Notes receivables, net (Note 6) 381.795 383,063 Pledges receivables, net (Note j) 1,837,792 1,948,026 Fixed assets, net (Note S) 7,732,172 7,125,898 Interests in trusts held by others (Note }) 408,968 397,161 Securities pledged to counterparties, at fair value (Notes 3 and 4) 162,790 57,551 Investment portfolio, at fair value (Notes 3 and 4) 45,647,599 43,275,926 TOTAL ASSETS $ 56,748,281 $ 53,720,063

LIABILITIES: Accounts payable $ 359,847 $ 346,322 Deferred revenue and other liabilities 1,327,454 930,439 Other liabilities associated with the investment portfolio (Notes 3, 4 and iij 884,501 920,558 Liabilities due under split interest agreements (Note w) 862,413 840,736 Bonds and notes payable (Note 11) 5,300,921 5,431,090 Accrued retirement obligations (Note 12) 983,552 1,092,275 Government loan advances (Note 6) 65,409 72,564 I 9,633,984 TOTAL LIABILITIES 9,784,097 sn

NET ASSETS 46,964.184 44,086,079

TOTAL LIABILITIES AND NET ASSETS S 56,748,281 S 53,720,063

Temporarily Permanently June 30 Unrestricted restricted restricted 2018 2017 NET ASSETS: 1 General Operating Account (COA)(Note g) $ 4,592.384 S 2,480,144 98,769 S 7,171,297 $ 6,455,723 Endowment (Note 5) 6,757,253 24,125,090 8,351,393 39,233,736 37,096.474 Split interest agreements (Note 10) 54,781 504,370 559,151 533,882 TOTAL NET ASSETS $ 11,349,637 $ 26,660,015 S 8,954,532 $ 46,964,184 $44,086,079

The accompanying notes ore an integral part ofthe consolidatedfinancial statements. STATEMENTS OF CHANCES IN NET ASSETS WITH GENERAL OPERATING ACCOUNT DETAIL with summarizedfinancial informationfor the year endedJune 30, 2017 For the year ended Temporarily Permanently )une30 in thousands ofdollars Unrestricted Restricted Restricted 2018 2017 OPERATING REVENUE: Student income: Undergraduate program $ 327,171 $ 327,171 S 313,224 Graduate and professional degree programs 585,797 585,797 559,474 Board and lodging 190,495 190,495 184,732 Continuing education and executive programs 458,047 458,047 410,664 Scholarships applied to student income (Note t}) (439,445) (439,445) (413,870) Total student income 1,122,065 0 0 1,122,065 1,054,224

Sponsored support (Note 14) Federal government - direct costs 453,084 453,084 452,852 Federal government - indirect costs 172,223 172,223 165,253 Non-federal sponsors - direct costs 85,974 $ 166,023 251,997 232,446 Non-federal sponsors - indirect costs 21,882 15,050 36,932 34,984 Total sponsored support 733,163 181,073 0 914,236 885,535

Gifts for current use (Note 13) 141,324 325,222 466,546 449,939

Investment income: i Endowment returns made available for operations (Note 9^ 318,607 1,503,038 1,821,645 1,787.417 GOA returns made available for operations 176,230 176,230 164,893 Other investment income 21,060 4,813 25,873 18,462 Total investment income 515,897 1,507,851 0 2,023,748 1,970,772

Other revenue (Note 16) 688,724 688,724 638,310 Net assets released from restriction 1,918,360 (1,918,360) 0 0 TOTAL OPERATING REVENUE 5,119,533 95.786 0 5,215,319 4,998,780

' OPERATING EXPENSES: Salaries and wages 1,943,836 1,943,836 1,885,692 Employee benefits (Note 12^ 569,223 569,223 569,030 Services purchased 617,210 617,210 591,135 Space and occupancy 410,441 410,441 371,349 Depreciation (Note 8) 357,965 357,965 348,885 Supplies and equipment 268,200 268,200 253,163 Interest (Note nj 187,883 187,883 202,547 Scholarships and other student awards (Note 13) 152,421 152,421 147,555 Other expenses (Note 17) 511,778 511,778 515,229 TOTAL OPERATING EXPENSES 5,018,957 0 0 5,018,957 4,884,585

NET OPERATING SURPLUS 100,576 95,786 0 196,362 114,195

NON-OPERATING ACTIVITIES: Income from GOA Investments 8,751 8,751 14,630 GOA realized and change in unrealized appreciation, net (Note 3) 475,207 475,207 303,751 GOA returns made available for operations (176,230) (176,230) (164,893) Change in pledge balances (Note ;) 28,562 28,562 (136,928) Change in interests in trusts held by others < (740) (740) (413) Gifts for facilities and loan funds (Note 13) 108,698 S 529 109,227 110,078 Change in retirement obligations (Note 12) 143,110 143,110 209,981 Other changes related to debt redemption 0 (229,357) Other changes 1,871 1,871 (970) Transfers between GOA and endowment (Note 9) (84,607) 6,465 (5.065) (S3,207) (23,276) Transfers between GOA and split interest agreements (Note 10^ 12,637 24 12,661 15,204 Non-operating net assets released from restrictions 198,865 (203,930) 5,065 V 0 0 TOTAL NON-OPERATING ACTIVITIES 566,967 (48,308) 553 519,212 97,807

GENERAL OPERATING ACCOUNT NET CHANGE DURING THE YEAR 667,543 47,478 553 715,574 212,002 Endowment net change during the year 609,080 1,093,046 435,136 2,137,262 1,430,731 Split interest agreements net change during the year (Note to) 943 24,326 25,269 32,016 NET CHANGE DURING THE YEAR 1,276,623 1,141,467 460,015 2,878,105 1,674,749 Net assets, beginning of year 10,073,014 25,518,548 8,494,517 44,086,079 42,411,330 NET ASSETS. END OF YEAR S 11,349,637 5 26.660,015 S 8,954,532 S 46.964,184 S 44.086.079

The accompanying notes ore on integral part of the consolidatedfinancial statements. STATEMENTS OF CHANCES IN NET ASSETS OF THE ENDOWMENT with summarizedfinancial informationfor the year endedJune jo, zot? For the year ended Temporarily Permanently June 30 In thousands ofdollars Unrestricted Restricted Restricted 2018 2017 Investment return (Note 3): Income from general investments S 8.349 S 39,426 $ 47,775 S 85,465 Realized and change in unrealized appreciation/(depreciation), net 586,968 2,697,738 3,284,706 2,566,526 Total investment return 595,317 2,737,164 0 3,332,481 2,651,991 Endowment returns made available for operations (318,607) (1,503,038) (1,821,645) (1,787,417) Net investment return 276,710 1.234,126 0 1,510,836 864,574

Gifts for endowment (Note 13) 41,627 247,357 $ 357.315 646,299 550,529 Transfers between endowment and the GOA (Note g) 84,607 (6,465) 5,065 83,207 23,276 Capitalization of split interest agreements (Note to) 5,229 20,478 25,707 29,243 Change in pledge balances (Note 7) (153,808) 14,499 (139,309) (48,892) Change in interests in trusts held by others (Note g) (1,331) 13,878 12,547 41.739 Other changes (3,155) (27,576) 28,706 (2.025) (29,738) Net assets released from restrictions 209,291 (204,486) (4,805) 0 0 NET CHANCE DURING THE YEAR 609,080 1,093,046 435,136 2,137,262 1,430,731 Net assets of the endowment, beginning of year 6,148,173 23.032.044 7,916,257 37,096,474 35,665,743 NET ASSETS OF THE ENDOWMENT, end of year $ 6.757,253 S 24,125,090 $ 8,351,393 S 39,233,736 $ 37,096,474

The accompanying notes are an integral part of the consolidatedfinancial statements. STATEMENTS OF CASH FLOWS with summorizedfinancial informationfor the year endedJune 30, 2017 For the year ended June 30

In thouiands ofdollars 3018 2017

Change in net assets , S 2,878,]05 $ 1,674,749 Adjustments to reconcile change in net assets to net cash (used in) operating activities: Depreciation 357,96S 348,885 Amortization of premium and discount related to bonds and notes payable (27,265) (55,748) Realized and change in unrealized (appreciationj/depreciation. net (3,829,446) (2,956,361) Change in fair value of interest rate exchange agreements (6.463) (14,212) Change in interests in trusts held by others (11,807) (41,326) Change in liabilities due under split interest agreements 46,753 58.696 Gifts of donated securities (179,131) (149.964) Proceeds from the sales of gifts of unrestricted securities 14,422 47,615 Cihs for restricted purposes (528,138) (570.583) Loss on redemption of debt 50.797 Loss on disposal of assets 8,281 32.274 Loss/(gain) on sale of property 1,644 (3.003) Change in accrued retirement obligations (108,723) (151.571) Changes in operating assets and liabilities: Receivables.net (39,417) (13.637) Prepayments and deferred charges (224) 20.352 Pledges receivable, net 110,234 186.194 Accounts payable (30,544) 13.198 Deferred revenue and other liabilities 397,015 106.195 NET CASH (USED IN) OPERATING ACTIVITIES (946,739) (1,417,450)

CASH FLOWS FROM INVESTING ACTIVITIES: Loans made to students, faculty, and staff (48,451) (50.122) Payments received on student, faculty, and staff loans 47,521 46.210 Change in other notes receivable 2,198 2,040 Proceeds from the sales and maturities of investments 15,309,908 70,540.252 Purchase of investments (14,671,506) (59.712,601) Change associated with repurchase agreements 700,881 828,320 Additions to fixed assets (937,744) (979.169) Proceeds from sale of property 1,293 3.649 NET CASH PROVIDED BY INVESTING ACTIVITIES 404,100 10,678,579

CASH FLOWS FROM FINANCING ACTIVITIES: Change in overdrafts included in accounts payable 6,356 (9.159) Change in split interest liability from new contributions, income and payments to annuitants (25,076) (9.162) Proceeds from issuance of debt 453,767 3,331.926 Debt repayments (556,671) (3,072.587) Proceeds from the sales of gifts of restricted securities 164,709 102.349 Gifts restricted for capital purposes 528,138 570.583 Affiliated entity contributions and distributions, net (16,343) (15.411) Change in repurchase and reverse repurchase agreements (10.135.778) Change in government loan advances (7,155) 2.268 NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES 547,725 (9,234,971)

NET CHANGE IN CASH 5,086 26,158 Cash, beginning of year 139,896 113,738 CASH, end of year $ 144,982 S 139,896

Supplemental disclosure of cash flow information: Accounts payable related to fixed asset additions S 109,181 5 71,468 Cash paid for interest S 215,166 $ 203,778

The accompanying notes are an integral part of the consolidatedfi nancial statements. 1. UNIVERSITY ORGANIZATION

Harvard University (the "University") is a private, not-for- Fellows of Harvard College (the "Corporation"), a governing profit institution of higher education with approximately board of the University, has oversight responsibility for all of 6,699 undergraduate and 13.331 graduate students. the University's financial affairs. The Corporation delegates Established in 1636, the University includes the Faculty substantial authority to the Schools and departments for the of Arts and Sciences, the John A. Paulson School of management of their resources and operations. Engineering and Applied Sciences, the Division of Continuing Education, ten graduate and professional The University includes Harvard Management Company Schools, the Radcliffe Institute for Advanced Study, a variety (HMC), a wholly owned subsidiary founded in 1974 to of research museums and institutes, and an extensive manage the University's investment assets. HMC is library system to support the teaching and research governed by a Board of Directors that is appointed by activities of the Harvard community. The President and the Corporation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation category includes unrestricted gifts and endowment income The accompanying consolidated financial statements balances. University-designated loan funds, and other have been prepared on the accrual basis of accounting unrestricted current funds. and include the accounts of the University and affiliated 03 organizations controlled by the University. Significant inter- TEMPORARILY RESTRICTED net assets are subject to legal affiliate accounts and transactions have been eliminated. or donor-imposed stipulations that will be satisfied either by actions of the University, the passage of time, or both. Funds transferred to the University on behalf of specific These net assets include gifts donated for a particular beneficiaries (agency funds) are recorded as assets and purpose, amounts subject to time restrictions such as liabilities in the Balance Sheets and are not included in the funds pledged for future payment, or amounts subject to Statement of Changes in Net Assets with General Operating legal restrictions such as portions of otherwise unrestricted Account Detail. capital appreciation and income, which must be reported as temporarily restricted net assets until appropriated for The financial statements include certain prior year spending in accordance with Massachusetts law. summarized comparative information in total, not by net asset classification. This information is not presented in PERMANENTLY RESTRICTED net assets ate subject to donor- sufficient detail to conform to generally accepted accounting imposed stipulations that they be invested to provide a principles (GAAP). Accordingly, such information should perpetual source of income to the University. Generally, be read in conjunction with the University's financial donors of these assets require the University to maintain statements for the year ended June 30, 2017, from which and invest the original contribution in perpetuity, but the summarized information is derived. Certain prior permit the use of some or all investment returns for general year amounts have been reclassified to conform to current or specific purposes. year presentation. Revenues from sources other than contributions are Net asset classifications generally reported as increases in unrestricted net assets. For the purposes of financial reporting, the University Expenses are reported as decreases in unrestricted net classifies resources into three net asset categories pursuant assets. Gains and losses on investments are reported as to any donor-imposed restrictions and applicable law. increases or decreases in unrestricted net assets, unless Accordingly, the net assets of the University are classified their use is restricted by donor stipulations or by law. in the accompanying financial statements in the categories Investment returns earned by restricted donor funds are that follow: initially classified as temporarily restricted net assets and then reclassified to unrestricted net assets when expenses UNRESTRICTED net assets are not subject to donor-imposed are appropriated or incurred for their intended purpose. restrictions. Funds invested in fixed assets and unrestricted Expirations of temporary restrictions on net assets are endowment funds comprise 99% of the University's reported as reclassifications from temporarily restricted to unrestricted net assets as of June 30, 2018. In addition, this unrestricted net assets and appear as "Net assets released from restrictions" and "Non-operating net assets released Tax-exempt status from restrictions" in the Statements of Changes in Net Assets. The University is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code. Unconditional pledges are reported as increases in the appropriate categories of net assets in accordance with On December 22, 2017, the Tax Cuts and jobs Act (the donor restrictions. "Act") was enacted. The Act impacts the University in several ways, including the addition of excise taxes on Net operating surplus executive compensation and net investment income, as Revenues earned, expenses incurred, and returns made well as new rules for calculating unrelated business taxable available for operations for the purpose of teaching, income. The overall impact of the Act remains uncertain conducting research, and the other programs and services until further regulatory guidance is issued. The University of the University are the components of"Net operating continues to evaluate the impact of the Act. surplus" in the Statement of Changes in Net Assets with General Operating Account Detail. Use of estimates The preparation of financial statements in accordance with Collections U.S. GAAP requires management to make estimates and The University's vast array of museums and libraries assumptions that affect reported amounts and disclosures. contains priceless works of art, historical treasures, literary Actual results could difier from those estimates. works, and artifacts. These collections are protected and preserved for public exhibition, education, research, and New accounting pronouncements the furtherance of.public service. They are neither disposed In january 2016, the Financial Accounting'Standards of for financial gain nor encumbered in any manner. Board (FASB) issued ASU 2016-01, Recognition and \D Accordingly, such collections are not recorded for financial Measurement of Financial Assets and Financial Liabilities, statement purposes. which address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Insurance programs This guidance allows an entity to choose, investment-by- The University, together with the Harvard-affiliated investment, to report an equity investment that neither teaching hospitals, has formed a captive insurance has a readily determinable fair value, nor qualifies for company. Controlled Risk Insurance Company (CRICO), to the practical expedient for fair value estimation using provide limited professional liability, general liability, and net asset value (NAV), at its cost minus impairment (if medical malpractice insurance for its shareholders. The any), plus or minus changes resulting from observable University self-insures a portion of its professional liability price changes in orderly transactions for the identical and general liability programs and maintains a reserve for or similar investment of the same issue. Impairment of incurred claims, including those related to Harvard Medical such investments must be assessed qualitatively at each School activities not occurring in the affiliated teaching reporting period. Entities must disclose their financial hospitals. CRICO provided malpractice coverage applies assets and liabilities by measurement category and form with no deductible for medical professionals practicing of asset either on the face of the statement of financial within Harvard's University Health Services department, position or in the accompanying notes. The ASU is effective the School of Dental Medicine, and the T.H. Chan School for fiscal year 2020 for the University. The provision to of Public Health, The University also maintains reserves elimiriate the requirement to disclose the fair value of for the self-insured portion of claims related to automobile financial instruments measured at cost (such as the fair liability, property damage, and workers' compensation; value of debt) has been early adopted by the University for these programs are supplemented with commercial excess fiscal year 2016. The University is currently evaluating the insurance above the University's self-insured limit. In impact of the remaining new guidance on the consolidated addition, the University is self-insured for unemployment, financial statements. the primary retiree health plan, and all health and dental plans for active employees. The University's claims In August 2016, the FASB issued ASU 2016-14, Presentation liabilities are recognized as incurred, including claims that of Financial Statementsfor Notfor-Profit Entities, which have been incurred but not reported, and are included in makes targeted changes to the not-for-profit financial operating expenses. reporting model. Under the new ASU, net asset reporting will be streamlined and clarified. The ASU is efTective for fiscal year 2019 for the University. The University is evaluating the impact of the new guidance on the consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenuefrom In March 2017, the FASB issued final guidance on Contracts ivith Customers at the conclusion of a joint efTort ASU 2017-07, Compensation - Retirement Benefits with the International Accounting Standards Board to create (Topic yij): Improving the Presentation of Net Periodic common revenue recognition guidance for U.S. GAAP Pension Cost and Net Periodic Postretiremenl Benefit Cost. and international accounting standards. This framework Presently, net benefit cost is reported as an employee cost ensures that entities appropriately reflect the consideration within operating income (or capitalized into assets where to which they expect to be entitled in exchange for goods appropriate). The amendment requires the bifurcation and services, by allocating transaction price to identified of net benefit cost. The service cost component will be performance obligations, and recognizing that revenue presented with other employee costs in operating income as performance obligations are satisfied. Qualitative and (or capitalized in assets). The other components will be quantitative disclosures will be required to enable users reported separately outside of operations, and will not be of financial statements to understand the nature, amount, eligible for capitalization. The ASU is effective for fiscal timing, and uncertainty of revenue and cash flows arising year 2020 for the University. The University is evaluating from contracts with customers. The ASU is effective the impact of the new guidance on the consolidated for fiscal year 2019 for the University. The University is financial statements. evaluating the impact this will have on the consolidated financial statements. In June 2018. the FASB issued ASU 2018-08, Clarifying the Scope and the Accounting Guidancefor Contributions In February 2016, the FASB issued ASU 2016-02, Leases, Received and Contributions Made. The new guidance clarifies which, requires a lessee to recognize a right-of-use asset the definition of an exchange transaction and the criteria and a lease liability, initially measured at the present value for evaluation whether contributions are unconditional m of the lease payments, in its balance sheet. The guidance or conditional. The ASU is effective for fiscal year 2019 also expands the required quantitative and qualitative for the University and any changes will be implemented disclosures surrounding leases. The ASU is effective simultaneously with adoption of the new revenue standard. for fiscal year 2020 for the University. The University The University is evaluating the impact of the new guidance is evaluating the impact of the new guidance on the on the consolidated financial statements. consolidated financial statements.

I INVESTMENTS

Investments are presented at fair value in accordance with income securities (principally US government securities) GAAP and under the guidelines prescribed by the HMC held for the University's working capital and liquidity needs; investment valuation policy, which is reviewed and approved publicly-traded securities associated with split interest by the HMC Board of Directors on an annual basis. agreements; and public and private investments donated to the University. The majority of the University's investments are managed by HMC in the GIA, a pooled fund that consists primarily The University's investment holdings as of June 30. of endowment assets. Certain other investments are 2018 and 2017 are summarized in the following table (in managed separately from the GIA. These other investments thousands of dollars): consist primarily of cash, short-term investments, and fixed

2018 2017 Investment portfolio, at fair value: Pooled general Investment account assets $ 44,113.615 $ 41,738,915 Other investments 1,533,984 1,537,011 Securities pledged to counterparties 162,790 57,551 INVESTMENT ASSETS 45,810,389 43,333,477

Pooled general investment account liabilties 869,020 898,614 Interest rate exchange agreement 15,481 21,944 INVESTMENT LIABILITIES 884,501 920,558 TOTAL INVESTMENTS. NET $ 44.925.888 $ 42,412,919 As of June 30. 2018 and 2017. University's net investments were comprised of the following components (in thousands of dollars):

2018 2017 POOLED GENERAL INVESTMENT ACCOUNT Endowment' $ 37,731,389 S 35,399,801 General operating account 4,154,494 4,066.488 Split interest agreements 820,725 789,972 Other internally designated funds 700,777 641,591 TOTAL POOLED GENERAL INVESTMENT ACCOUNT NET ASSETS S 43,407,385 $40,897,852 OTHER INVESTMENTS OUTSIDE THE GENERAL INVESTMENT ACCOUNT General operating and other investments' 917,664 930,421 Split interest agreements 600,839 584,646 TOTAL OTHER INVESTMENTS OUTSIDE THE GENERAL INVESTMENT ACCOUNT S 1,518,503 S 1,515,067 TOTAL INVESTMENTS. NET s 44,925,888 S 42,412,919

'Includes only the portion ofthe endowment invested in the CIA and excludes pledges, interests in trusts held by others, other non-CIA investments, and CIA interest and dividends net ofall internal and external managementfees and expenses. 'Consists primarily ofrepurchase agreements and US government securities 0/1679,623 and 5630.48$ as ofJune 30. 3018 and 2017, respectively.

Investment return A summary of the University's total return on investments for fiscal years 2018 and 2017 is presented below (in thousands of dollars):

2018 2017 Return on pooled general investment account: SD Realized and change in unrealized appreciation, net S 3,833,460 S 2,923,828 Net investment income 55,199 98,912 Total return on pooled general investment account' 3,888,659 3,022,740 Return on other investments: Realized and change in unrealized (depreciation)/appreciation. net (4,014) 32,533 Net investment income 38,585 32,944 Total return on other investments 34,571 65,477 Realized and change in unrealized appreciation on interest rate exchange agreement, net 4,010 11,234 TOTAL RETURN ON INVESTMENTS S 3,927,240 S 3,099,451

' Net ofall internal and external managementfees and expenses.

Fair value hierarchy The University's investments have been categorized based LEVEL 3 Prices or valuations that require inputs upon the fair value hierarchy in accordance with ASC 820. that are significant to the fair value measurement, which prioritizes the inputs to valuation techniques used to unobservable and/or require the University to develop its measure fair value of investment assets and liabilities into own assumptions. three levels; Investments measured at net asset value (as reported by LEVEL 1 Unadjusted quoted prices in active markets that external managers) as a practical expedient for the fair value are accessible at the measurement date for identical, are excluded from the fair value hierarchy. unrestricted assets or liabilities; The level of an asset or liability within the fair value LEVEL 2 Quoted prices in markets that are not considered to hierarchy is based on the lowest level of any input that be active or financial instruments for which all significant is significant to the fair value measurement. Transfers inputs are observable, either directly or indirectly; between levels are recognized at the beginning of the year. The University endeavors to utilize all relevant and available information in measuring fair value. The following is a summary of the levels within the fair value hierarchy for those investment assets and liabilities subject to fair value measurement as of June 30. 2018 and 2017 (in thousarids of dollars);

2018 2017 NAV as Practical Level 1 Level 2 Level 3 Expedient Total Total ASSETS:' Cash and short-term investments $ 1,407,841 S 1,407,841 S 3,422,154 Repurchase agreements S 1,149,363 1,149,363 1,850,245 Domestic equity 490,134 $ 4,500,353 4,990,487 4,674,449 Foreign equity 857,401 1,544,369 2,401,770 1,552,165 Global equity 2,008,253 2,008,253 1,239,346. Domestic 6xed income 1,505,967 1,505,967 2,067,679 Foreign fixed income 25,141 25,141 28,378 Emerging market equity and debt 419,100 2,142,935 2,562,035 1,310,664 High yield 12.105 5 119,249 131,354 875,295 Hedge funds 81,520 12,814,216 12,895,736 7,964,081 Private equity 90,328 8,369,851 8,460,179 7,629,888 Natural resources 11,569 2,183,270 59,970 2,254,809 2,869,953 Real estate 230,214 3,774,842 4,005,056 5,392,029 Inflation-indexed bonds 847,163 847.163 825,719 Due from brokers 1,184 4.640 5,824 67,608 Other investments 6,815 3,545 1,662 12,022 19,488 INVESTMENT ASSETS SUBJECT TO FAIR VALUE LEVELING 5 5,583.236 S 1,154,092 S 2,710,883 $ 35,214,789 S 44,663,000 S 41,789.141 0 Other investment assets not subject to fair value^ 1,147,389 1,544,336 TOTAL INVESTMENT ASSETS S 45,810,389 $ 43,333,477 Interests in trusts held by others' 408,968 408,968 397,161 NON-INVESTMENT ASSETS SUBJECT TO FAIR VALUE LEVELING S 408,968 S 408,968 S 397,161 TOTAL ASSETS S 46.219.357 S 43.730.638

LIABILITIES:' Due to brokers^ 6.727 S 108.659 S 115,386 S 34,847 Other liabilities subject to fair value $ 223,601 223,601 177,993 INVESTMENT LIABILITIES SUBJECT TO FAIR VALUE LEVELING 6,727 S 108,659 S 223,601 338,987 212,840 Other investment liabilities not subject to fair valued 545,514 707,718 TOTAL INVESTMENT LIABILITIES 884,501 920,558 Liabilities due under split interest agreements^ 862.413 862,413 840.736 NON-INVESTMENT LIABILITIES SUBJECT TO FAIR VALUE LEVELING S 862,413 862,413 840,736 TOTAL LIABILITIES S 1.746.914 S 1.761.294 ' Certain prior year amounts have been reclassijied to conform to current year presentation. 'As ofJune 30, 2018, otherassets not subject to fair value consists primarily ofreceivablesfor transactions that settled subsequent to the balance sheet date of $922,438, before eliminating inter-company balances, and consolidated assets 0/5162,922. As ofJune 30. 2017, otherassets not subject tofair value consist primarily ofreceivablesfor transactions that settled subsequent to the balance sheet date 0/51,390.858. before eliminating inter-company balances, and consolidated assets of5116,361. 1 Amounts excludedfrom investments and included separately on the University's Balance Sheets. * Includesfair value ofan interest rate exchange agreement on the University's debt portfolio 0/515,481 and $21,944 as ofJune 30, 2018 and 2017, respectively. ^ As ofJune 30, 2018, other liabilities not subject to fair value include consolidated liabilities of$200,631. As ofJune 30, 2017, other liabilities not subject to fair value consist primarily ofpoyobles for the purchase ofsecurities 0/5102,479, before eliminating inter-company balances, and consolidated liabilities 0/5225.059, The following is a rollforward of Level 3 investments for the year ended june 30, 2018 and the net |une 30, 2017 rollforward of Level 3 investments (in thousands of dollars):

Net change Beginning in unrealiz^ Ending balance as of Net realized appreciation Purchases/ Sales/ Transfers Transfers out balance as w

INVESTMENT ASSETS: High yield S 425 s 376 $ 118,448 s 119,249 Hedge funds 89,471 S (41.667) 36,799 S (3.083) 81,520 Private equity 880,530 (517,582) 475,822 59.690 (808.132) 90,328 Natural resources 2,778,134 2,800 (126,951) 131,681 (602.394) 2,183.270 Real estate 4,292,544 (388,678) 388,284 168.611 (1,021.717) $ (3.208.830) 230,214 Due from brokers 4,640 4,640 Other investments 2,559 (8971 1,662 INVESTMENT ASSETS SUBJECT TO FAIR VALUE LEVELING s 8,048,303 $ (945,127) S 773.433 $ 478,430 S (2,435.326) S 0 S (3,208,830) S 2.710.883

Interests in trusts held by others - 397,161 11.807 408.968 NON-INVESTMENT ASSETS SUBJECT TO FAIR VALUE LEVELING s 397,161 S 11,807 S 408,968 TOTAL ASSETS SUBJECT TO FAIR VALUE LEVELING s S.44S.464 s (945.127) S 785.240 S 478.430 $ (2.435J261 S 0 S P,208,830] S 3.119.851

INVESTMENT LIABILITIES: Other liabilities subject to fair value s 177,993 S (4,061) S (34,990) $ 84,659 S 223,601 TOTAL LIABILITIES SUBJECT TO FAIR VALUE LEVELING $ 177.993 s 0 s (4,061) $ (34.990) S 84.659 S 0 S OS 223.601 01

NET ASSETS SUBJECT TO FAIR VALUE LEVELING s 8.267.471 s f945.12h S 789.301 S 513.420 S a519.985) S 0 $ p,208,830) S 2.896.250 'Total change in unrealized oppreciotion/(depreciotion) relating to Level 3 investment assets and investment liabilities still held by the University at June 30, 2018 is 5(183,677) and is rejected in 'Realized and change in unrealized appreciationI (depreciohon), net" in the Statements of Changes in Net Assets. Net change Beginning in unreaiiz^ Ending balance as of Net realized appreciation Purchases/ Sales/ Transfers Transfers out balance as of julyi.aoiE gains/flosses) (depredation)' contributions distributions into Level 3 ofLeveh lunejo.zoi? PRIOR YEAR NET ASSETS SUBJECT TO FAIR VALUE LEVELING S 7.5S2.M3 S 259.327 S n.379.908tS 1.447.770 $ f2.975.319t S 3.362.608 S 0 S 8.267.471 'Total change in unrealized apprecialion/(depreciation) relating to Level 3 investment assets and investment liabilities still held by the University at June 30, 2017 is 1/1,117,334/ and is repeated in "Realized and change in unrealized appreciation/(depredation), net" in the Statements of Changes in Net Assets.

During fiscal year 2018, the University sold a portion of a liabilities, income, and expenses associated with these direct real estate investment vehicle to a third-party and entities and intercompany accounts and transactions have engaged an external investment manager to manage the been eliminated during consolidation. vehicle. As a result of this transaction, $3.2 billion of direct real estate investment assets were transferred out of Level 3. The University's investment strategy incorporates a As of June 30, 2018, the fair value of these investments is diversified asset allocation approach and maintains, within measured at NAV as reported by the external manager and defined limits, exposure to the movements of the global is included in investment assets measured at NAV as the equity, fixed income, real estate, commodities, and private practical expedient. In fiscal year 2017 certain securities, equity markets. Exposure to each asset class is achieved included in private equity, natural resources and real through investments in individual securities, direct estate, were valued using a secondary sale price and were investments in special purpose vehicles and/or through transferred into Level 3. vehicles advised by external managers.

Investment strategy and risk The investments within diverse markets involve various The University utilizes a number of wholly-owned risks such as price, interest rate, market, sovereign, subsidiary entities to support its investment activities. currency, liquidity, and credit risks. Additionally, the The consolidated financial statements include all assets. GIA's direct investments in natural resources expose the University to a unique set of risks such as operational, Collateral is exchanged as required by fluctuations in environmental and geopolitical risks. Uncertain national the fair value of these instruments. In the event of a policies and social, political and economic instability counterparty default, the University generally has the right increase the potential for expropriation of assets and to close out all transactions traded under such agreements imposition of governmental restrictions. The University and to net amounts owed or due across all transactions also considers manager concentration risk. As of June 30, and offset such net payable or receivable with collateral 2018, 26% of the GIA NAV was made up of five diversified posted by one party or the other. The University separately fund managers. The University anticipates that the value reports the fair value of assets for which counterparties and composition of its investments may,from time to time, have the right to pledge or exchange the collateral they have fluctuate substantially in response to any or all of the risks received: investment portfolio assets that are unencumbered described herein. are included in "Investment portfolio, at fair value" in the Balance Sheets. The University does not offset repurchase Liquidity agreements that are subject to master netting arrangements Cash and short-term investments are recorded at cost, which or similar arrangements on the University's Balance approximates fair value, and include cash in bank accounts, Sheets. Refer to Note 4 for information related to ofTsetting institutional money market funds, and other temporary of derivatives. investments held for working capital purposes with original maturities of three months or less. Cash and short-term Dividend and interest income investments do not include cash balances held as collateral Dividend income is recognized net of applicable by the University. Cash and short-term investment balances withholding taxes on the ex-dividend date. Non-cash designated for investment purposes are included in the dividends are recorded at the fair value of the securities m "Investment portfolio, at fair value" in the Balance Sheets. received. Interest income and expenses are recorded net Cash and short-term investments classified as Investments of applicable withholding taxes on the accrual basis of were $1.4 billion and $3.4 billion at June 30, 2018 and accounting. The University amortizes bond premiums and 2017, respectively. accretes bond discounts using the effective yield method and when cash collection is expected. The University has various sources of liquidity at its disposal within its investment pools, including approximately Traded securities $2.6 billion in cash and short-term investments (including Instruments listed or traded on a securities exchange are repurchase agreements of $1.1 billion) at June 30, 2018 in valued at the last quoted price on the primary exchange the CIA and the COA. In addition, the University estimates where the security is traded. Where there is no readily that as of June 30, 2018, it could liquidate additional available closing price on the valuation date, long positions unencumbered US government securities of $2.1 billion are valued at the bid price and short positions are valued at within one business day (assuming typical settlement the ask price. Restrictions that are attached to a security are terms) to meet any immediate short-term needs of the factored into the valuation of that security, reflective of the University (unaudited). estimated impact of those restrictions. Investments in non- exchange traded debt and equity instruments are primarily Repurchase agreements valued using inputs provided by independent pricing The University Balance Sheets display both the assets services or by broker/dealers who actively make markets in and corresponding liabilities generated by repurchase these securities. transactions. The University enters into these transactions under agreements containing master netting arrangements. Over the counter derivatives The University requires the fair value of the collateral Over the counter(OTC) derivative products classified exchanged under these agreements to be equal to or in as due to/from brokers may include option, swap, credit excess of the total amount of the agreement, including default, interest rate, and forward contracts. These types of interest where applicable. At June 30, 2018 and 2017, instruments are primarily valued using industry standard the University had gross asset repurchase agreements models with independent market inputs, or by broker of $1.1 billion and $1.9 billion, respectively, which were quotes. Inputs such as prices, spreads, curves, and/or broker fully collateralized. quotes are evaluated for source reliability and consistency with industry standards. Counterparty marks obtained and utilized to determine daily collateral requirements are also used to corroborate input reasonability. The University considers current market conditions including offair value. To evaluate the fair value of the University's interest rate and credit risks in its evaluation of inputs, externally managed investments, the University has pricing methodologies, and models utilized to determine assessed factors including, but not limited to, the external fair values. advisor's adherence to fair value principles in calculating the capital account balance, the existence of transactions at External advisors NAV at the measurement date, and the existence or absence Investments managed by external advisors include of certain restrictions at the measurement dale. investments in private equity, real estate, natural resources, hedge funds and other externally managed funds. The Distributions are received through the liquidation of the majority of these investments are not readily marketable and underlying assets of the fund over its remaining life. are reported at NAV utilizing the most current information Investments in externally managed funds generally have provided by the external advisor, subject to assessments limited redemption options for investors and, subsequent that the information is representative of fair value and in to final closing, may or may not permit subscriptions by consideration of any additional factors deemed pertinent new or existing investors. These entities may also have the to the fair value measurement. The University evaluates ability to impose gates, lockups, and other restrictions on an its external advisors through a manager due-diligence investor's ability to readily redeem out of their investment program executed by HMC, which includes an analysis of interest in the fund. an advisor's use of and adherence to fair value principles. The University, as an investor, has commitments to make The fair value of the investments in these asset classes has periodic contributions in future periods to the investments generally been estimated using the University's capital managed by external advisors. The amounts of these account balance for each fund, unless the University has expected disbursements as of June 30, 2018 and 2017 are S3 deemed the NAV to be an inappropriate representation disclosed below (in thousands of dollars);

As of)une 30.2018 As of June 30, 2017 Remaining Remaining unfunded Estimated unfunded Estimated Fair value' commitments remaining life' Pair value' commitments remaining life' Private equity funds 6,84S,28S 6.47S,884 4-10 5,845,459 4,635,090 4-10 Real estate funds 3,900,327 1,542,336 4-10 1,552,640 926,382 4-10 Other externally managed funds^ 2.421,899 2,868,214 2-8 2,352,402 1,924,219 2-8 TOTAL $ 13,170,511 $ 10,886,434 S 9,750,501 S 7,485,691 ' Represents the fair value of thefunded portion ofinvestments with remaining unfunded commitments. 'The estimated remaining lives of these funds, expressed in years, oreforward-looking projections based on the University's estimates and could vary significantly depending on the investment decisions ofexternal managers, changes in the University's investment portfolio, and other circumstances. 1 Investments in externally managedfunds primarily include exposures to hedgefunds and natural resources.

Direct investments investment characteristics. The cost approach is utilized Direct investments in real estate, natural resources and when the cost of the investment is determined to be the private equity are primarily valued using a combination best representation of fair value. This method is typically of independent appraisals and/or one or more industry used for newly purchased or undeveloped assets. The HMC standard valuation approaches (e.g., income approach, Board of Directors discusses the valuation process and market approach, or cost approach). The income approach results with HMC management, and makes determinations is primarily based on the investment's anticipated future on significant matters impacting valuation that may arise income using one of two principal methods: the discounted from time to time. cash flow method or the capitalization method. Inputs and estimates developed and utilized in the income approach The valuation procedures performed on direct investments may be subjective and require judgment regarding are based on industry standard processes for each respective significant matters such as estimating the amount and asset class. The inputs utilized in any valuation model timing of future cash flows, forward pricing assumptions may be significant and unobservable, and require a certain and the selection of discount and capitalization rates that degree of judgment. The University examines market data appropriately reflect market and credit risks. The market and collaborates closely with industry experts to attempt to approach derives investment value through comparison arrive at the best estimation of fair value for each respective to recent and relevant market transactions with similar asset. The table below presents the ranges of significant unobservable inputs used to value the University's Level 3 of inputs utilized as of the measurement date, these inputs assets. These ranges represent the significant unobservable may change over time, which may have a material efTecl on inputs that were used in the valuation of each type of Level 3 the valuation of these types of investments in the future. asset. While the inputs described below represent the range

As ofjune 30. 2018 As ofjune 30. 2017 Level 3 investments Range of Level 3 investments Range of subject to fair value inputs utilized in subject to fair value inputs utilized in Sienificant unobservable input by asset class'-^ (in thousands of dollars)* valuation models (in thousands of dollars)* valuation model' Natural resources: $ 2,183,270 $ 2,695,739 Income approach discount rate S.0%-16,096 5.0% - 20.0% Price per planted hectare Sl,386-$158,900 $2,394- 5168,932 Price per gross hectare $n8-$51,S59 S448 -$48,560 High yield: 106,481 Income approach discount rate 8.696 Shadow rating discount rate 8.4%-9,996 Weighted average cost of capital 7,1%- 10.9% Collateral coverage market risk factor 100% Real estate: 40,669 3,373,294 Income approach discount rate 13.0%- 13,5% 5.3%-17,8% Income approach growth rate 3,0% Discount for lack of marketability 15,0% Capitalization rate 2,3%-8.5% Recent financing - discount 22,5% Loan to value 12,8%-83.9.% Market interest rate 2.6%-8,3% Private equity: 19,494 46,005 Income approach discount rate 6.0%-8,0% 6.0% - 8,0% EBITDA multiple lOx Net income multiple 5.0x 7.0x Comparable transaction price per unit $25 - $30 Hedge funds: 67,742 72,717 Book value multiplier 0.8x 0.7x Other liabilities subject to fair value (158,008) (177,993)

Loan to value 8,5%-44,0% 1 3.8%-42,9% Market interest rate 2,5%-15,0% 2.5%-15,0% NET AMOUNT S 2,259,648 S 6,009,762 ' The fair value ofinvettments may be determined using multiple valuation techniques. 'Included within Level 3 investments is 5636,60? and Si.spjoq as ofjune 30, ?oi3 and ?oi7, respectively, which were valued using other inputs including. but not limited to, single source broker quotations, third party pricing and prior transactions. } The range ofinputs encompasses a variety ofinvestment types within each asset class.

4. DERIVATIVES

The University uses a variety of financial instruments with use of industry standard analytical tools that measure the off-balance sheet risk involving contractual or optional market exposure of each position within a strategy. The commitments for future settlement, which are exchange strategies are monitored daily, and positions are frequently traded or executed OTC. Certain instruments are cleared adjusted in response to changes in the financial markets. and settled through central clearing counterparties, while others are bilateral contracts between two counterparties. In connection with its derivative activities, the University These instruments are used to increase or decrease generally maintains master netting agreements and exposure to a given asset class, with the goal of enhancing collateral agreements with its counterparties. These the returns of these asset classes. The market risk of a agreements provide the University the right, in the event particular strategy is influenced by the relationship between of default by the counterparty (such as bankruptcy or a the financial instruments with off-balance sheet risk and failure to pay or perform), to net a counterparty's rights and the ofTsetting positions recorded in the Balance Sheets. The obligations under the agreement and to liquidate and ofTset University manages exposure to market risk through the collateral against any net amount owed by the counterparty. The following table presents information about the University's derivatives by primary risk exposure for the years ended )une 30, 2018 and 2017 (in thousands of dollars):

For the For the year ended year ended As of june 30.2017 1 Cross Cross Cross Cross derivative derivative Net profit/ derivative derivative Net profit/ Primary risk exposure assets liabilities (loss)* assets liabilities (loss)* Equity instruments $ J7.826 S 123,157 S 351,485 $ 94.460 $ 34,949 S 514.977 Fixed income instruments' 15,481 4,010 21.944 157.210 Commodity instruments (3.251) Currency instruments 112.975 126,495 (91.194) 1,713.930 1.723.578 (18,609) Credit instruments 4,770 (9) 4.842 56,111 SUBTOTAL 1SS,S71 265,133 S 264,292 1,813,232 1,780,471 S 706,438

Counterparty netting' Bilateral OTC (149,747) (149.747) (1,745.624) (1.745.624) TOTAL COUNTERPARTY NETTING (149,747) (149,747) (1,745,624) (1,745,624)

NET AMOUNTS INCLUDED IN THE BALANCE SHEETS' 5,824 115,386 67,608 34,847

Collateral Cash collateral received/posted 871 6,009 Securities collateral received/posted^ 4,032 135,934 114.290 34,818 TOTAL COLLATERAL 4,903 135,934 .114,290 40,827 m

NET AMOUNT 921 (20,548) (46,682) - (5,980)

NET AMOUNT IN ACCORDANCE WITH ASC 210^ S 921 $ 0 S 0 S 0

'For the year endedJune 30, JOiS. balances include a gross derivative liability 0/51^,481 and 0 net gain of$4,010. related to an interest rate exchange agreement on the University's debt portfolio. For the year ended June 30, 2017, balances include a gross derivative liability of$21,944 and a net loss of $11,234 related to an interest rate exchange agreement on the University's debt portfolio. These positions ore further discussed in Note 11. 'CAAP permits the netting ofderivative assets and liabilities and the related cash collateral received and paid when a legally enforceable master netting agreement exists between the University and a derivative counterparty. Refer to Note 3for information related to offietting ofcertain other collateralized transactions. 'Included within the "Investment portfolio, atfair value" and "Other liabilities associated with the investment portfolio" line items ofthe Balance Sheets. * Included within "Realized and change in unrealized appreciation!(depreciation), " tvith/n the Statements oF Changes in Net Assets. ^ Includes securities posted to meet initial margin requirements on exchange tradedfutures. ^ Excludes any over-collateralized amounts in accordance with ASC 210.

The following section details the accounting for each expiration or exercise, the University records a realized type of derivative contract, as well as the University's gain or loss equal to the difTerence between the proceeds intended purpose for entering into each type of paid/received upon closing and the original premium derivative instrument. paid/received.

Options During fiscal years 2018 and 2017, the University transacted The University purchases and sells put and call options approximately 10 and 600 equity and fixed income option to take advantage of expected volatility in the price of trades with an average transaction size of approximately underlying instruments. When purchasing an option, the 664.000 and 78,600 contracts, respectively. During fiscal University pays a premium, which is recorded as an asset year 2018 the University did not enter into currency option and subsequently marked-to-market to reflect the current contracts nor commodity option trades. During the fiscal value of the option. When the University sells (writes) an year 2017 the University transacted approximately 100 option, the premium received is recorded as a liability and currency option contracts with average USD equivalent subsequently marked-to-market to reflect the current fair notional amounts of approximately $90.4 million per value of the option written. Premiums paid or received from contract and transacted approximately 70 commodity option options that expire unexercised are treated as realized losses trades, with an average transaction size of approximately and gains, respectively. When an option is closed before 300 contracts. Swap contracts INTEREST RATE CONTRACTS The University enters into The University enters into swap contracts, which are interest rate swaps to hedge certain investment positions contracts between two parties to exchange future cash against interest rate fluctuations: to benefit from interest flows at periodic intervals based on a notional principal rate fluctuations: to obtain better interest rate terms than it amount, to increase or decrease its exposure to changes in would have been able to get without the swap; or to manage the level of interest rates, underlying asset values and/or the interest, cost, and risk associated with its outstanding credit risk. Payments are exchanged at specified intervals, and/or future debt. Interest rate swaps involve the exchange accrued daily commencing with the effective date of the by the University with another party of its respective contract and recorded as realized gains or losses. Gains commitments to pay or receive interest at specified intervals or losses are realized in the event of an early termination based on a notional amount of principal. During fiscal of a swap contract. Risks of loss may include unfavorable year 2018, the University did not enter into interest rate changes in the returns of the underlying instruments or swap nor cap/floor contracts. During fiscal year 2017. the indexes, adverse fluctuations of interest rates, failure of the , University transacted approximately 2,800 interest rate counterparty to perform under the terms of the agreement, swap and cap/floor contracts with average notional amounts and lack of liquidity in the market. of approximately $184.3 million.

Collateral in the form of securities or cash may be posted to TOTAL RETURN SWAPS The University enters into total or received from the swap counterparty in accordance with return swaps to manage its exposure to market fluctuations the terms of the swap contract. Realized gains or losses are in various asset classes. Total return swaps involve recorded relating to periodic payments received or made commitments to pay interest in exchange for a market on swap contracts and with respect to swaps that are closed linked return, both based on notional amounts. To the m prior to termination date. When the University enters into a extent the total return of the security or index underlying swap transaction, it may make or receive a payment equal to the transaction exceeds or falls short of the offsetting the value of the swap on the entry date and amortizes such interest rate obligation, the University will receive a payments to realized gain or loss over the outstanding term payment from or make a payment to the counterparty, of the swap. The terms of the swap contracts can vary, and respectively. During fiscal year 2018, the University they are reported at fair value based on a valuation model or transacted 50 equity swap contracts with average notional a counterparty provided price. amounts of approximately $30.5 million, and 39 index swap contracts with an average notional amounts of The University generally enters into credit default, interest approximately $87.3 million. During fiscal year 2017, the rate, and total return swap contracts. University transacted approximately 25 commodity swap contracts with average notional amounts of approximately CREDIT DEFAULT CONTRACTS The University enters into $33.9 million: 1,400 equity swap contracts with average credit derivatives to simulate long and short bond exposure notional amounts of approximately $9.4 million: 200 that is either unavailable or considered to be less attractively currency swap contracts with average notional amounts priced in the bond market, or to hedge exposure obtained in of approximately $17.8 million; and 100 credit swaps with the bond market. The University also uses these derivatives average notional amounts of approximately $22.0 million. to reduce risk where it has exposure to the issuer, or to take an active long or short position with respect to the Forward currency contracts likelihood of an event of default. The underlying debt The University enters into forward currency contracts in security on which the derivative is structured can be based connection with settling planned purchases or sales of on a single issuer, a "basket" of issuers, or an index. The securities, or to hedge the currency exposure associated buyer of a credit default swap is obligated to pay the seller with some or all of the University's portfolio securities. A of the credit protection a periodic stream of payments over forward currency contract is an agreement between two the term of the contract in return for a contingent payment parties to buy and sell a currency at a set price on a future upon the occurrence of a credit event with respect to the date. The value of a forward currency contract fluctuates issuer of the debt security. During fiscal year 2018 the with changes in forward currency exchange rates. Forward University did not enter into credit default contracts. During currency contracts are marked-to-market daily and the fiscal year 2017, the University transacted approximately change in fair value is recorded by the University as an 450 credit default contracts with average notional amounts unrealized gain or loss. During fiscal years 2018 and 2017, of approximately $14.0 million. the University transacted approximately 626 and 8,200 forward currency contracts with average USD equivalent Counterparty credit exposure notional amounts of approximately $35.7 million and S5.7 Financial instruments with off-balance sheet risk involve million, respectively. counterparty credit exposure. The policy of the University is to require collateral to the maximum extent possible under Futures contracts normal trading practices. Collateral, generally in the form The University uses futures contracts to manage its of debt obligations issued by the US Treasury, is exchanged exposure to financial markets, including hedging such on a daily basis as required by fluctuations in the market. exposures. Upon entering into a futures contract, the In the event of counterparty default, the University has the University is required to deposit an amount of cash or right to use the collateral held to offset any losses ensuing securities with its prime broker in accordance with the from the default event. Specific credit limits are established initial margin requirements of the broker or exchange. for counterparties based on their individual credit ratings. Futures contracts are marked-to-market daily based on Credit limits are monitored daily by the University and settlement prices established by the board of trade or are adjusted according to policy, as necessary. Some of exchange on which they are traded, and an appropriate the financial instruments entered into by the University payable or receivable for the change in fair value is recorded contain credit-risk-relaled contingency features that allow by the University. Gains and losses are realized when the the parties to the agreement to demand immediate payment contracts expire or are closed. During fiscal years 2018 for outstanding contracts and/or collateral. If material and 2017, the University transacted approximately 134 and credit-risk-related contingency features were triggered on 49,000 futures trades with an average transaction size of June 30, 2018, no additional collateral would have been due approximately 924 and 30 contracts, respectively. to counterparties, whereas at June 30, 2017, $8 million in additional collateral would have been due to counterparties for derivative contracts. w

5, RECEIVABLES

The major components of receivables, net of reserves for 2018 2017 doubtful accounts of $12.9 million and $10.6 million as Federal sponsored support S 72,148 $ 59,730 of June 30, 2ot8and 2017, respectively, were as follows Executive education 66,837 46,824 Publications 60,424 52,280 (in thousands of dollars); Gift receipts 22,S10 13,098 Tuition and fees 20,479 19,932 Non-federal sponsored support 14,030 21.046 Other 44,830 48,931 TOTAL RECEIVABLES, NET S 301,258 S 261,841

6. NOTES RECEIVABLE

Notes receivable are recorded initially at face value plus accrued interest, which approximates fair value. Notes receivable, and related allowance for doubtful accounts, were as follows (in thousands of dollars):

2018 2017 Receivable Allowance Net Receivable Allowance Net Student Loans: Government revolving S 59,941 $ 1.433 S 58,508 $ 72.712 $ 1,817 $ 70,895 institutional 87,206 2,372 84,834 87,027 '2,248 84,779 Federally insured 371 371 375 375 Total student loans 147,518 3,805 143,713 160,114 4,065 156,049 Faculty and staff loans 230,335 179 230,156 217,069 179 216,890 Other loans 30,989 23,063 7,926 24,832 14,708 10,124 TOTAL $ 408,842 $ 27,047 $ 381,795 t 402,015 S 18,952 $ 383,063 Government revolving loans are funded principally with rate or applicable federal rate may be subsidized for an federal advances to the University under the Perkins Loan initial period. The educational loans are primarily zero- Program and certain other programs. These advances interest loans. totaled $65.4 million and $72.6 million as of June 30, 2018 and 2017, respectively, and are classified as liabilities in the The University assesses the adequacy of the allowance Balance Sheets. The Perkins Loan Program ended during for doubtful accounts by evaluating the loan portfolio, fiscal year 2018 and as a result the University made the including such factors as the differing economic risks first of its annual required repayments to the government, associated with each loan category, the financial condition interest earned on the revolving and institutional loan of specific borrowers, the economic environment in which programs is reinvested to support additional loans. The the borrowers operate, the level of delinquent loans, the repayment and interest rate terms of the institutional loans value of any collateral, and, where applicable, the existence vary considerably. of any guarantees or indemnifications. In addition to these factors, the University reviews the aging of the loans Faculty and staff notes receivable primarily consists of receivable and the default rate in comparison to prior years. mortgage and educational loans. Mortgages include The allowance is adjusted based on these reviews. The shared appreciation loans, loans that bear interest at the University considers the allowance at June 30, 2018 and applicable federal rate and interest-free loans. In addition, 2017 to be reasonable and adequate to absorb potential certain mortgages that bear interest at the current market credit losses inherent in the loan portfolio.

PLEDGES RECEIVABLE m Unconditional promises to donate to the University in the Pledges receivable as of June 30, 2018 and 2017 have future are initially recorded at fair value (pledge net of been designated for the following purposes (in thousands discount) and subsequently amortized over the expected of dollars): payment period, net of an allowance for uncollectible 2018 2017 pledges. The University's indicative i- to 5-year taxable General Operating Account balances: unsecured borrowing rate is used to discount pledges Gifts for current use S 552,268 $ 550,819 receivable upon receipt. Discounts of $91.8 million and Non-federal sponsored awards 127,140 99,623 $75.7 million for the years ended June 30, 2018 and 2017, Facilities and loan funds 222,735 222,626 Total General Operating Account balances 902,143 873,068 respectively, were calculated using rates ranging from 1.3% to 3.1%. Endowment 935,649 1,074,958 TOTAL PLEDGES RECEIVABLE, NET $1,837,792 $1,948,026 Pledges receivable included in the financial statements as of June 30, 2018 and 2017 are expected to be realized as Because of uncertainties with regard to realizability follows (in thousands of dollars): and valuation, bequest intentions and other conditional promises are only recognized as assets if and when the 2018 2017 Within one year S 276,074 S 283,376 specified conditions are met. Non-bequest conditional Between one and five years 1,104,294 1,133,505 pledges totaled $59.5 million and $49.1 million as of More than five years 632,340 705,632 June 30, 2018 and 2017, respectively. Less: discount and allowance for uncollectible pledges (174,916) (174,487) TOTAL PLEDGES RECEIVABLE, NET S 1,837,792 S 1,948,026 8. FIXED ASSETS

Fixed assets are reported at cost or. if a gift, at fair value The major categories of fixed assets as of June 30. 2018 and as of the date of the gift, net of accumulated depreciation. 2017 are summarized as follows (in thousands of dollars): Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

Estimated useful life 2018 2017 (in years) Research facilities S 2,376,412 $ 2,302,795 • Classroom and office facilities 2,046,4S4 1.831,097 35 Housing facilities 2,010,649 1.757,609 35 Other facilities 427,397 414.587 35 Service facilities 751,236 733,956 35 Libraries 487,598 483,836 35 Museums and assembly facilities 788,587 783.536 35 Athletic facilities 223,072 191,782 35 Land 968,922 967,978 n/a Construction in progress 1,337,279 1,079,120 n/a Equipment 1,289,975 1.288,717 •* SUBTOTAL AT COST 12,707,611 11,835,013 Less: accumulated depreciation (4,975,439) (4.709,115) FIXED ASSETS, NET S 7,732,172 S 7,125,898

* Estimated useful lives ofcomponents rangefrom 10 to 45 yeors. ** Estimated useful lives ofequipment rangefrom 4 to 10 years.

Certain University facilities are subject to restrictions as Equipment includes general and scientific equipment, to use, structural modifications, and ownership transfer. computers, software, furniture, and vehicles.

* Included in the fixed asset balances are restricted facilities with a net book value of $292.8 million and $260.7 niillion The University has asset retirement obligations of as of June 30, 2018 and 2017, respectively. $174.4 million and $135.0 million, which are included in "Deferred revenue and other liabilities" in the Balance The costs of research facilities are separated into the Sheets as of June 30, 2018 and 2017, respectively. shell, roof, finishes, fixed equipment, and services. These components are separately depreciated.

ENDOWMENT AND GENERAL OPERATING ACCOUNT NET ASSETS

The University's endowment consists of 13,789 separate The University is also the beneficiary of certain irrevocable funds established over many years for a wide variety of trusts held and administered by others. The estimated fair purposes. Endowment fund balances, including funds values of trust assets, which include the present values functioning as endowment, are classified and reported ofexpected future cash flows from outside trusts and the as unrestricted, temporarily restricted, or permanently fair value of the underlying assets of perpetual trusts, are restricted net assets in accordance with donor specifications recognized as assets and increases in net assets when the and state law. Net unrealized losses on permanently required trust documentation is provided to the University. restricted endowment funds are classified as a reduction to unrestricted net assets until such time as the fair value The fair values of these trusts are provided by the external equals or exceeds historic dollar value. Unrestricted net trustees and are adjusted annually by the University. assets were reduced by $2.6 million and $3.4 million These are included as Level 3 investments in the fair value for such losses in fiscal year 2018 and 2017, respectively. hierarchy table in Noiej. Although funds functioning as endowment are not subject to donor restrictions, decisions to spend their principal require the approval of the Corporation. All but a small fraction of the endowment is invested in the CIA (Nolej). The endowment consisted of the following as of)une 30, 2018 and 2017 (in thousands of dollars):

2018 2017 Temporarily Permanently Unrestricted restricted restricted Total Total Endowment funds S (2,648) S 20,737,189 $ 7,378,054 $ 28,112,595 5 26,615,944 Funds functioning as endowment 6,759,901 3,048.618 9,808,519 9,041.146 Pledge balances 326.769 608,880 935,649 1.074.958 Interests in trusts held by others 12,514 364,459 376,973 364.426 TOTAL ENDOWMENT $ 6,757,253 S 24,125,090 S 8,351,393 $ 39,233,736 $ 37,096,474

The University's endowment distribution policies are one-time or time-limited and therefore, are excluded from designed to preserve the value of the endowment in real net operating surplus. These decapitalizations totaled terms (after inflation) and generate a predictable stream of $46.0 million and $53.5 million in fiscal year 2018 and available income. Each fall, the Corporation approves the 2017, respectively. These additional decapitalizations, in endowment distribution for the following fiscal year. combination with the endowment distribution, resulted in an aggregate payout rate of 5.3% and 5.4% in fiscal year 2018 The endowment distribution is based in part on and 2017. respectively. presumptive guidance from a formula that is intended to provide budgetary stability by smoothing the impact of General operating account annual investment gains and losses. The formula's inputs The GOA consists of the general or current funds of the reflect expectations about long-term returns and inflation University as well as the assets and liabilities related to rates. For fiscal year 2018, the endowment distribution student and faculty loans and facilities. The GOA accepts, ED approved by the Corporation (prior to decapitalizations) was manages, and pays interest on deposits made by University equal to 5.2% of the fair value of the endowment invested departments: invests surplus working capital; makes loans; in the GIA as of the beginning of the fiscal year. The total and arranges external financing for major capital projects. endowment distribution made available for operations was It is used to manage, control, and execute all University $1.8 billion in both fiscal year 2018 and 2017. respectively. financial transactions, except for those related to investment activities conducted by HMC. Each year the Corporation also approves certain decapitalizations from the endowment to support strategic, mission-critical activities or objectives that are typically

The GOA consisted of the following as of June 30, 2018 and 2017 (in thousands of dollars);

2018 2017 Temporarily Permanently Unrestricted restricted restricted Total Total General Operating Account S 4.592,384 $ 2.480,144 98,769 $ 7,171,297 S 6.455.723

The temporarily restricted net assets consist primarily of unexpended income, gifts, and pledges. The permanently restricted net assets are loan funds. 10. SPLIT INTEREST AGREEMENTS

Under split interest agreements, donors enter into trust measured using the practical expedient in the fair value or other arrangements with the University in which the hierarchy table in Note}. Associated liabilities are recorded University receives benefits that are shared with other at the present value of estimated future payments due to beneficiaries and institutions. Split interest agreement (SIA) beneficiaries and other institutions. These liabilities are investment assets are invested primarily in the GIA and calculated using the University's current taxable unsecured publicly-traded securities, a small segment is managed by borrowing rate of 3.1% and 2.3% as of June 30, 2018 and an external advisor, and all are recorded in the "Investment 2017. respectively portfolio, at fair value" in the University's Balance Sheets. Additional disclos^ires are included in Note j. The publicly- The changes in split interest agreement net assets for traded securities are included as Level i and externally fiscal years 2018 and 2017 were as follows (in thousands managed investments are included in investments of dollars):

2018 2017 Temporarily Permanently restricted restricted Total Total Investment return; investment income S 2.695 S 8.670 S 11,365 S 13,280 Change in realized and unrealized appreciation, net 23,947 77,027 100,974 123,926 Total investment return 26,642 85.697 112,339 137,206

Gifts (Note 15)* 6.524 • 5.642 12,166 19,606 Payments to annuitants (15.588) (50,140) (65,728) (64,659) Transfers to endowment (5.229) (20,478) (25,707) (29,243) Transfers between SIA and the COA (12.637) (24) (12,661) (15,204) Change in liabilities and other adjustments 1.231 3,629 4,860 (15,690) NET CHANCE DURING THE YEAR 943 24,326 25,269 32,016 Total split interest agreement net assets, beginning of year 53,838 480,044 533,882 501,866 TOTAL SPLIT INTEREST AGREEMENT NET ASSETS, end ofvear S 54.781 S 504.370 S 559.151 S 533.882 * Shown at net present value. The undiscounted value of these gifts was 129,237 and 542,217for the years endedJune 30, 301S and 2017, respectively.

Split interest agreement net assets as of June 30, 2018 and 2017 consisted of the following (in thousands of dollars):

2018 2017 Split interest agreement investments (Note 3) Charitable remainder trusts S 924,576 S 896,451 Charitable lead trusts 125,341 123,396 Charitable gift annuities 250,473 230.352 Pooled income funds I21I174 124.419 Total split interest agreement investments' 1.421,564 1,374,618

Liabilities due under split interest agreements: Amounts due to beneficiaries (801,355) (779,885) Amounts due to other institutions (61,058) (60.851) Total liabilities due under split interest agreements (862,413) (840,736)

TOTAL SPLIT INTEREST AGREEMENT NET ASSETS, end of year S 559,151 $ 533,882 For the year endedJune 30, 2018, 5820,723 of SIA investments are held in the pooled general investment account and 56oo,8j9 of SIA investments are held in the other investments outside the general investment account. For the year ended June 30, 2017, 5789,972 ofSIA investments ore held in the pooled general investment account and $584,646 of SIA investments are held in the other investments outside the general investment account. Refer to Note 3. 11. BONDS AND NOTES PAYABLE

Bonds and notes payable as of June 30, 2018 and 2017 were as follows (in thousands of dollars):

Fiscal year Years to One-year OutstandinR principal of issue Fnal maturity' yield' 20i81 2017I Tax-exempt bonds and notes payable:

Variable-rate demand bonds and commercial paper Series R - daily 2000-2006 14 0.9% $ 131,200 $ 131.200 Series Y - weekly 2000 17 1.1% 117,905 117.905 Total variable-rate bonds and notes payable 1.0% 249,105 249.105

Fixed-rate bonds: Series N (par value. SSo.ooo) 1992 2 6.3% 79.815 79.714 Series 2009A (par value. $22,645) 2009 4,8% 22,692 45.513 Series 2010A (par value. S49.S90) 2010 3 4.6% 52,134 52.861 Series 2010B (par value, Sno.235) 2011 6 4.7% 115.891 117.938 Series 2016A (par value, $1,539,720) 2017 22 3.8% 1,886.801 1.912,871 Total fixed-rate bonds 4.0% 2.157,333 2,208,897

Total tax-exempt bonds and notes payable 3.7% 2,406,438 2,458,002

Taxable bonds and notes payable:

Variable-rale bonds; m Commercial paper 2012 <1 1.6% 262,798 343,341 Total variable-rate bonds 1.6% 262,798 343.341

Fixed-rate bonds: Series 2008A (par value. $243,000) 200s 20 S.6% 242,875 242.869 Series aooSC (par value. $125,205) 2008 S.3% 125,205 125,205 Series 2008D (par value. $500,000) 2009 21 6.5% 498.751 498,691 Series 2010C (par value. $300,000) 2011 22 4.9% 298,506 298.439 Series 2013A (par value. $402,000) 2013 19 3.4% 402,000 402.000 Series 2016B (par value. $1,000,000) 2017 38 3.3% 995,643 995,521 Total fixed-rate bonds 4.4% 2.562,980 2.562.725

Total taxable bonds and notes payable 4.1% 2,825,778 2,906,066

Other notes payable Various Various Various 87,057 86,773 Unamortized bond issuance costs (18,352) (19.751) TOTAL BONDS AND NOTES PAYABLE 4.0% S 5,300,921 S 5,431,090

' The weighted overage maturity ofthe portfolio onJune 30, 30t8 was 18.3 years. 'Exclusive ofinterest rate exchange agreement. Inclusive ofthis agreement, the overall portfolio rate was 0.04% higher. } Balances include original issuance premiums/discounts.

Interest expense related to bonds and notes payable was Fiscal year Principal payments $187.5 Tiilbon and $201.1 million for fiscal 2018 and 2017, 2019 $ 410.300 respectively. The interest expense in the SlaUment of 2020 117.999 2021 88.185

Changes in Net Assets with General Operating Account Detail 2022 109.619 includes additional components related to capital leases. 2023 54,890 The aggregate amount of scheduled principal payments, Thereafter 4.190.360 TOTAL PRINCIPAL PAYMENTS $4,971,353 including maturing commercial paper but excluding unamortized discounts and premiums, underwriter's discount and unamortized cost of issuance fees are (in thousands of dollars): The University is rated Aaa by Moody's Investors Service become subject to mandatory tender, the purchase price of and AAA by Standard & Poor's Global Ratings. The the bonds will be paid from the remarketing of such bonds. Standard & Poor's rating was re-affirmed in November 2017 However, if the remarketing proceeds are insufficient, the and the Moody's Investors Service rating was re-affirmed in University will have a generalobligation to purchase the December 2017. bonds tendered with cash on hand.

The University has two unsecured, revolving credit facilities Interest rate exchange agreements totaling $1.5 billion, both of which expire in January 2020. In fiscal 2018, the University had in place one interest rate There was no outstanding drawn balance on either of these exchange agreement, used to manage the interest cost and credit facilities at June 30, 2018. risk associated with a portion of its outstanding debt.

As of June 30, 2018, the University had $249.1 million The fair value of the interest rate exchange agreement of variable-rate demand bonds outstanding (excluding was $(15.5) million and $(21.9) million as of June 30, 2018 commercial paper) with either a daily or weekly interest and 2017. respectively and is recorded in "Other liabilities rate reset, as noted in the bonds and notes payable table. In associated with the investment portfolio" on the University's the event that the University receives notice of any optional Balance Sheets. tender on its variable-rate demand bonds, or if the bonds

12. EMPLOYEE BENEFITS

The University offers current employees a choice of established a trust to hold plan assets for its defined benefit ID health plans, a dental plan, short-term and long-term pension plans. The fair value of the trust's assets was disability plans, life insurance, tuition assistance, and S828.1 million and $836.5 million as of June 30. 2018 and a variety of other benefits such as subsidized passes for 2017, respectively. During fiscal years 2018 and 2017. the public transportation and for Harvard athletic facilities. University made cash contributions to the defined benefit In addition, the University has retirement plans covering pension plan of $15.5 million and $13.4 million, respectively. substantially all employees. The University recorded expenses for its defined contribution plans of $141.5 million and $135 0 million for The University uses a measurement date of June 30 for its fiscal year 2018 and 2017, respectively. pension and postretirement health plans. Postretirement health benefits Pension benefits The University provides postretirement health coverage All eligible faculty members and staff are covered by and life insurance to substantially all of its employees. As retirement programs that include a defined benefit of June 30. 2018, the University had internally designated component, a defined contribution component, or a and invested $692.2 million to fund the postretirement combination of the two. health benefit accrued liability of $806.7 million. As of June 30. 2017, the University had internally designated and In accordance with the Employee Retirement Income invested $633.6 million to fund the postretirement health Security Act (ERISA) requirements, the University has benefit accrued liability of $853.0 million. The.following table sets forth the pension and postretirement plans' funded status that is reported in the Boiance Slteetsas of June 30, 2018 and 2017 (in thousands of dollars);

Pension benefits Postretifement health benefits

2018 2017 2018 2017 Change in projected benefit obligation: Projected benefit obligation, beginning of year S 1,075,728 5 1.105,690 S 853,003 $ 941,815 Service cost 11,233 12,274 34,645 40,155 Interest cost 42,418 42,056 35,522 37,872 Plan participants' contributions 3,377 3,449 Plan change' (193) (5,094) Cross benefits paid (44,157) (40,459) (23,555) (24,247) Actuarial (Kain)/loss (80,260) (43,833) (96,085) (140,947) PROjECTED BENEFIT OBLIGATION, end of year' 1,004,962 1,075,728 806,714 853,003

Change in plan assets: Fair value of plan assets, beginning of year 836,456 803,659 Actual return on plan assets 20,302 59,832 Employer contributions 15,523 13,424 Gross benefits paid (44.157) (40,459) FAIR VALUE OF PLAN ASSETS, end of year 828,124 836,456 0 0

UNFUNDED STATUS' S (176,838) $' (239,272) $ (806,714) $ (853,003) ' The postretirement plan change of$(133) in fiscal ytor 1018 and S(3,o$4) in fiscal year 201J. reflects plan changesfor union employees, effectiveJanuary 1,3016, that increased cost-shoring and the length ofservice neededfor the maximum subsidy. 'Measurement ofthe University's pension benefit obligation including assumed salary increases (required by CAAP). ED 'These amounts totaling 1983,552 as ofJune 30, 2018 and 51,092,275 as ofJune 30, 2017 are'included in the "Accrued Retirement Obligations" line in the Balance Sheets.

The accumulated pension benefit obligation (ABO) is a Net periodic benefit cost measurement of the University's pension benefit obligation, Components of net periodic benefit cost recognized based on past and present compensation levels and does in operating activity and other amounts recognized in not include assumed salary increases. The ABO was non-operating activity in unrestricted net assets in the $860.8 million and $908.7 million at June 30, 2018 and Statements of Changes in Net Assets with General Operating 2017, respectively. The funded status disclosed above has Account Detail are summarized as follows for the years been prepared in accordance with pension accounting rules. ended June 30, 2018 and 2017 (in thousands of dollars): When measured on an IRS funding basis, which informs the University's required cash contribution amount, the plan was overfunded at January i, 2018.

Pension benefits Postretifement health benefits 20)8 2017 2018 2017 Components of net periodic benefit cost: Service cost S 11,233 $ 12,274 S 34,645 S 40,155 interest cost 42,418 42,056 35,522 37,872 Expected return on plan assets (50,426) (49,030) Amortization of: Actuarial loss/(gain) 10,088 15,710 (6,564) Prior service cost/(credit) 288 288 (7,116) (6,693) Total net periodic benefit cost recognized in operating activity 13,601 21,298 56,487 71,334

Other amounts recognized in non-operating activity in unrestricted net assets: Current year net actuarial loss/(ga[n) (50,136) (54.635) (96,085) (140,947) Current year net prior service cost (193) (5,094) Amortization of: Prior service (cost)/credit (288) (288) 7,116 6,693 Actuarial (lossl/eain (10,088) (15,710) 6,564 Total other amounts recognized in non-operating activity' (60,512) (70.633) (82,598) (139.348) Total recognized in Statements ofCfionges m Net Assets with General Operating Account Detail S (46,911) $ (49,335) $ (26,111) $ (68,014) These amounts totaling $(143,110) infiscal year 3018 and 5(209,981) in fiscal year 2017 include gains and losses and other changes in the actuarially determined benefit obligations arising in the current period but that have not yet been reflected within net periodic benefit costf(income) and are included in the "Change in Retirement Obligations" line in the Statements of Changes in Net Assets with General Operating Account Detail. Cumulative amounts recognized as non-operating changes in unrestricted net assets are summarized as follows for the years ended )une 30, 2018 and 2017 (in thousands of dollars);

Pension benefits Postretirement health benefits 20t8 2017 2018 2017 Net actuarial loss/(gain) $ 97,697 $ 157.921 S (266,133) S (176,612) Prior sen/ice cost/(credit) 1,469 1,756 (53,589) (60,512) Cumulative amounts recognized in unrestricted net assets S 99,166 $ 159,677 S (319,722) S (237,124)

The estimated net actuarial loss and prior service cost Other assumptions and health care cost trend rates used for the defined benefit plan that will be amortized from in determining the year end obligation as well as the unrestricted net assets into net periodic benefit (income)/ net periodic benefit (income)/cost of the pension and cost in fiscal year 2019 are $3.3 million and $0.3 million, postretirement health plans are summarized as follows for respectively. The estimated net actuarial gain and fiscal years 2018 and 2017: estimated prior service credit for the postretirement health benefit that will be amortized from unrestricted net assets into net periodic benefit (income)/cost in fiscal year 2019 are ($13.3) million and ($7.1) million, respectively.

Pension benefits Postretirement health benefits 2018 2017 2018 2017 Weighted-average assumptions used to determine benefit obligation as ofjune 30: Discount rate 4.30% 4.00% 4.20% 4,05% Compensation increase trend: Initial rate 3.00% 3.00% 3.00% 3.00% Ultimate rate 4.00% 4.00% 4.00% 4.00% Year of ultimate 2021 2021 2021 2021

Health care cost trend rate: Initial rate n/a n/a 5.00% 5.50% Ultimate rate n/a n/a 4.75% 4.75% Year of ultimate n/a n/a 2023 2023 Weighted-average assumptions used to determine net periodic benefit (income)/cost: Discount rate 4.00% 3.85% 4.05% 3.90% Expected long-term rate of return on plan assets 6.50% 6.50% n/a n/a Compensation increase trend: Initial rate 3.00% 3.00% 3.00% 3.00% Ultimate rate 4.00% 4.00% 4.00% 4.00% Year of ultimate 2021 2021 2021 2021

Health care cost trend rate: Initial rate n/a n/a S.50% 6.00% Ultimate rate n/a n/a 4.75% 4.75% Year of ultimate n/a n/a - 2023 2023

As an indicator of sensitivity, a one percentage point change in assumed health care cost trend rate would affect 2018 as shown in the following table (in thousands of dollars):

1% point increase 1% point decrease Effect on 2018 postretirement health benefits service and interest cost S 20.034 S (12.732) Effect on postretirement health benefits obligation as of June 30, 2018 185,371 (122,899)

The expected return on pension plan assets is determined given the percentage weighting allocated to each asset class. by utilizing HMC's capital markets model, which takes After calculating the expected real return, an assessment into account the expected real return, before inflation, for is made to accommodate the expected inflation rate for the each of the pension portfolio's asset classes, as well as the forthcoming period. The final expected return on assets is correlation of any one asset class to every other asset class. the aggregate of the expected real return plus the expected This model calculates the real returns and correlations inflation rate. and derives an expected real return for the entire portfolio, Plan assets The actual asset allocation of the investment portfolio for the pension plan at June 30, 2018 and 2017, along with target allocations for June 30, 2019, is as follows:

20iq Target lune 30, 2018 june ^o. 2017 Asset allocation b/ category for pension plan: Equity securities 30-55% 38.8% 37.7% Fixed .income securities 30-50 48.9 45.3 Real estate 0-5 0,0 1.0 Hedge funds 10-30 10.9 12.9 Cash 0-5 1.4 3.1 TOTAL OF ASSET ALLOCATION CATEGORIES 100.0% 100.0%

The University's investment strategy for the pension expects to continue this strategy in future years. The portfolio is to manage the assets across a broad and investment program is also managed to comply with all diversified range of investment categories, both domestic ERISA regulations. and international. The objective is to achieve a risk-adjusted return that is in line with the long-term obligations that the The following is a summary of the levels within the fair University has to the pension plan beneficiaries. During value hierarchy for the pension plan assets subject to fiscal year 2018, the University maintained its allocation to fair value measurement as of June 30, 2018 and 2017 (in fixed income securities to manage the interest rate volatility thousands of dollars): associated with its pension obligations. The University

2017 m 2018 NAV as practical Level 1 Level 2 •Levels expedient Total Total PLAN ASSETS: Cash and short-term investments $ 21,951 S 21,951 S 34,158 Domestic equity 24 J 145,965 145,989 128,142 Foreign equity 73,244 33,857 107,101 95,735 Domestic fixed income 99,104 S 259,522 358,626 336,892 Foreign fixed income 21.110 21,110 20,200 Emerging market equity and debt 32,291 11,425 26.474 70,190 71,784 Hedge funds 89,505 89,505 105,391 Due from brokers 330 330 404 Buy-sell backs 25,962 25,962 0 Private equity 8,994 8,994 25,935 Real estate 34 34 8,361 PLAN ASSETS SUBJECT TO FAIR VALUE LEVELING S 226,944 S 318,019 S 0 S 304,829 S 849,792 $ 827,002 Other assets not subject to fair value 3,007 9,454 TOTAL PLAN ASSETS $ 852,799 S 836,456

PLAN LIABILITIES: Due to brokers S 22 S 22 FoHivard sale commitment 20,022 20,022 PLAN LIABILITIES SUBjECT TO FAIR VALUE LEVELING s 20,044 S 20,044 Other liabilities not subject to fair value 4,631 TOTAL PLAN LIABILITIES S 24,675

The following is a rollforward of Level 3 investments for the year ended June 30, 2018 (in thousands of dollars);

Net change Beginning Net realized in unrealized Transfers Transfers Ending balance as of gains/ appreciation Purchases/ Sales/ into out of balar>ce as of |uiyi,20i7 (losses) (depreciation) contributions distributions Level 3 Level 3 lune 30.2018 PLAN ASSETS: Private equity 15,445 S (17,606) $ 12,382 (10,228) Real estate 8,264 8,755 (7,464) PLAN ASSETS SUBJECT TO FAIR VALUE LEVELING 23.709 S 127.1611 S 21.137 S 7 S (17.6921 S O S O S The following is a rollforward of Level 3 investments for the year ended June 30, 2017 (in thousands of dollars):

Net Net change Beginning realized inunrealiz^ Transfers Transfers Ending tulanceasof gains/ appreciation Purchases/ Sales/ into out of balance as of July 1,2016 (losses) (depredation) contributions distributions Level V Level 3 June 30,2017

PRIOR YEAR NET ASSETS SUBJECT TO FAIR VALUE LEVELING 0 $ 4,412 $ (2,877) S 64 S (9,627) $ 31,737 S O S 23,709 Private equity and real estate investments valued using a secondary sale price were transferred into Level 3.

Expected future benefit payments Employer contributions of $14.9 million are expected for The following table summarizes expected benefit payments fiscal year 2019 to fund the pension benefit plan. and subsidies for pension and other ppstretirement benefits for the University (in thousands of dollars):

Expected benefit payments Fiscal year Pension Postretirement health 2019 55,212 21.334

2020 55,889 23,809

202t 58,323 25,950

2022 60,646 28,030 2023 62,673 30,266 Thereafter 336,191 188,409 m

STUDENT FINANCIAL AID

Financial aid granted to students is summarized as follows for the years ended June 30, 2018 and 2017(in thousands of dollars): 2018 2017 Scholarsbips and other student awards: Scholarships applied to student income S 439,445 S 413,870 Scholarships and other student awards paid directly to students 152,421 147,555 Total scholarships and other student awards 591,866 561,425

Student employment 76,133 74,074 Student loans 15,943 21,519 Aftency financial aid' 19,564 19,282 TOTAL STUDENT FINANCIAL AID S 703,506 s 676,300 ' Represents aidfrom sponsorsfor which the University acts as an agentfor the recipient.

14. SPONSORED SUPPORT

Total expenditures funded by US government sponsors Sponsored grants and contracts normally provide for or by institutions that subcontract federally-sponsored the recovery of direct and indirect costs. The University projects to the University were $625.3 million and recognizes revenue associated with direct costs as the $618.1 million in fiscal year 2018 and 2017. respectively. related costs are incurred. Recovery of related indirect The University's principal source of federally-sponsored costs is generally recorded at fixed or predetermined funds is the Department of Health and Human Services. rates negotiated with the federal government and other The University also has many non-federal sources of sponsors. Predetermined federal indirect cost rates have sponsored awards and grants, including corporations, been established for the University Area and the Medical foundations, slate and local governments, foreign School (including the School of Dental Medicine) through governments, and research institutes. fiscal year 2019 and forT.H. Chan School of Public Health through fiscal year 2023. Funds received for federally- sponsored activity are subject to audit. GIFTS

Gifts are classified as unrestricted, temporarily restricted, Additionally gifts are categorized by purpose as "Current or permanently restricted net assets in accordance with use", "Non-federal sponsored grants". "Endowment funds' donor specifications. "Split interest agreements", or "Facilities and loan funds".

Gifts received for the year ended june 30, 2018 are summarized as follows (in thousands of dollars}:

2018 Donor redesignations/ ' Gifts received other changes Total Current use $ 466.991 $ (445) S 466,546 Non-federal sponsored grants 183.331 (2.258) 181,073 Endowment funds' 646.340 (41) 646,299 Split interest agreements' 12.166 12,166 Loan funds and facilities 109,410 (183) 109,227 TOTAL GIFTS S 1,418,238 $ (2,927) s 1,415,311 ' Cifi receipts include non-cash gifts of$10 million for the year endedjune jo, 2018. 'Shown at net present value. The undiscounted value of these gifts was $29,387for the year endedJune 30, 2018.

Gifts received for the year ended (une 30, 2017 are summarized as follows (in thousands of dollars):

2017 Donor redesignations/ m Gifts received other changes Total Current use $ 450.978 $ (1,039) s 449,939 Non-federal sponsored grants 153.566 (1.677) 151,889 Endowment funds 514.639 35.890 550,529 Split interest agreements' 19.606 19,606 Loan funds and facilities 142.098 (32.020) 110,078 TOTAL GIFTS S 1,280,887 S 1,154 s 1,282,041 Shown at net present value. The undiscounted value ofthese gifis was J42.217for the year endedJune 30, 2017.

16. OTHER REVENUE

The major components of other revenue for the years 2018 2017 ended june 30, 2018 and 2017 were as follows (in thousands Publications and royalties from copyrights S 226,757 / S 216.377 of dollars); Rental and parking' 135,529 134.974 Services income 120,309 103.463 Health and clinic fees 61,211 53.937 Royalties from the commercialization of intellectual property' 54,573 36.289 Sales income 29,665 31,695 Interest income 10,699 10.390 Other student income 5,421 5,463 Other 44,560 45.722 TOTAL OTHER REVENUE $ 688,724 S .638,310 ' The University is the lessor ofspace and facilities under operating leases, the incomefrom which is included in rental and parking, Excludes distributions to external'parties. OTHER EXPENSES

The major components of other expenses for the years 2018 2017 ended June 30, 2018 and 2017 were as follows {in thousands Subcontract expenses under sponsored projects S 165,445 $ 167,416 of dollars): Travel 99,555 96,199 Publishing 46,223 47,671 Advertising 36,113 29,543 Taxes and Fees 35,278 31,445 Postage 18,073 19,047 Insurance 17,182 16,977 Telephone 14,398 13,942 Other 79,511 92,989 TOTAL OTHER EXPENSES $ 511,778 $ 515,229

18. FUNCTIONAL CLASSIFICATION OF OPERATING EXPENSES

Operating expenses are allocated functionally on a Operating expenses by functional classification for the years direct basis. Operations and maintenance expenses are ended June 30, 2018 and 2017 were as follows (in thousands allocated based on square footage. During the fiscal year of dollars): 2017, the University adjusted certain functional expense 2018 2017 classifications to better align with industry practice. instruction $1,263,491 $ 1,193,349 Research 1,109,831 1,077,541 Institutional support 911,993 911,811 Academic support 633,466 614,877 Auxiliary services 564,217 557.406 Student services 203,899 203,323 Libraries 179,639 178,723 Scholarships and other student awards 152,421 147,555 TOTAL EXPENSES $5,018,957 $4,884,585

22: COMMITMENTS AND CONTINGENCIES

Lease commitments Fixed asset-related commitments The University is the lessee ofequipment and space under The University has various commitments for capital operating (rental) and capital leases. Rent expense related projects involving construction and renovation of certain to leases was $86.0 million and $76.5 million in fiscal year facilities, real estate acquisitions, and equipment purchases, 2018 and 2017, respectively. for which the outstanding commitments as of June 30, 2018 totaled approximately $621.6 million. Future minimum lease payments under these operating and capital leases (in thousands of dollars); Environmental remediation The University is subject to laws and regulations concerning Operating Capital environmental remediation and has established reserves 2019 $ 78,381 S 16,431

2020 66.408 11,665 for potential obligations that management considers to be 2021 59,236 10,943 probable and for which reasonable estimates can be made. 2022 54,093 11,215 These estimates may change substantially depending 2023 50,342 11,276 Thereafter 321,648 163,027 on new information regarding the nature and extent of TOTAL FUTURE MINIMUM PAYMENTS $ 630,108 $ 224,557 contamination, appropriate remediation technologies, and regulatory approvals. Costs of future environmental remediation have been discounted to their net present value. Management is not aware of any existing conditions that it believes are likely to have^a material adverse eflect on the University's financial position, changes in net assets, or cash flows. Utilities purchase commitments General The University has entered into Power Purchase The University is a defendant in various legal actions Agreements (PPAs) with a series of utilities providers to arising from the normal course of its operations. While it is purchase natural gas and electricity for various quantities not possible to predict accurately or determine the eventual and time periods. As of June 30, 2018, future obligations outcome of such actions, management,believes that the under the PPAs are as follows {in thousands of dollars): outcome of these proceedings will not have a material adverse effect on the University's financial position,

2019 19,737 changes in net assets, or cash flows.

2020 16,595 12,328 2021 The University has evaluated subsequent events through 2022 6,631 2023 5,579 October 25, 2018, the date the financial statements Thereafter 11,661 were issued. The University has concluded that no material TOTAL UTILITY FUTURE PURCHASE OBLIGATIONS $ 72,531 events have occurred that are not accounted for in the accompanying financial statements or disclosed in the accompanying notes. PRESIDENT AND FELLOWS OFFICERS

OF HARVARD COLLEGE LAWRENCE S. BACOW President LAWRENCE S. BACOW President PAUL ). FINNECAN

PAUL |. FJNNECAN Treasurer Treasurer

ALAN M. CARBER jAMES W. BREVER

KENNETH I. CHENAULT

SUSAN L. GRAHAM KATHERINE N. LAPP

WILLIAM F. LEE Executive Vice President

BIDDY MARTIN

JESSICA TUCHMAN MATHEWS ROBERT W. lULIANO KAREN CORDON MILLS Senior Vice President and PENNY PRITZKER General Counsel DAVID M. RUBENSTEIN

SHIRLEY M. TILCHMAN PAUL ANDREW THEODORE V. WELLS. JR. Vice Presidentfor Public Affairs and Communications

BOARD OF OVERSEERS MARC GOODHEART Vice President and Secretary CERALDINE ACU N A-S U N S H IN E of the Uniuersily MICHAEL BROWN

SUSAN L. CARNEY MARILYN HAUSAMMANN P. LINDSAY CHASE-LANSDALE

R: MARTIN CHAVEZ Vice Presidentfor Human Resources

PAUL L. CHOI MARIANO-FLORENTINO "TINO" THOMAS ). HOLLISTER CU^LLAR Vice Presidentfor Finance, and

PHILIP HART CULLOM Chief Financial Officer

DARIENNE B. DRIVER

FERNANDE R. V. DUFFLY ANNE H. MARCULIES CHRISTOPHER B. FIELD Vice President and HELENA BUONANNO FOULKES ChiefInformation Officer

BRIAN GREENE

CARLA A. HARRIS TAMARA ELLIOTT ROGERS JAMES E. K. HILDRETH Vice Presidentfor Alumni Affairs MEREDITH "MAX" HODGES and Development MARILYN HOLIFIELD KETANJI BROWN JACKSON LEAH ROSOVSKY BETH Y. KARLAN Vice Presidentfor Strategy and Programs DEANNA LEE

MICHAEL LYNTON SANJAY H. PATEL SARAH E. THOMAS ALEJANDRO RAMIREZ MACANA Vice Presidentfor the Harvard Library

DIEGO A. RODRIGUEZ

LESLEY FRIEDMAN ROSENTHAL MEREDITH WEENICK

YVETTE ROUBIDEAUX Vice Presidentfor Campus Services

LESLIE P. TOLBERT

KENT WALKER JOHN SILVANUS WILSON, JR. -

ON LEAVE

GWILL E. YORK Harvard's President & Leadership| Harvard University Page 1 of 5

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About Harvard / Harvard's President & Leadership

Harvard's leadership is responsible for the strategic vision for the University.

Lawrence S. Bacow leads Harvard, and is the 29th President of the University.

The Office of the Provost, led by Provost Alan M. Garber, fosters collaboration across the University and manages changes in policies and practices that affect the academic life of the university as a whole. The Schools are led by officers and deans, who are responsible for Harvard's academic programs and curricula.

Governance By charter,' Harvard has two governing boards—the President and Fellows of Harvard College (also known as the Corporation') and the Board of Overseers. The basic architecture of the two-board system is defined by the University's charter, which is reflected in a series of documents dating to the mid- seventeenth century. Through their complementary efforts, the two boards perform the essential roles ordinarily associated with a board of trustees, while helping to shape the University's agenda, inquiring into the quality and progress of its activities, and assuring that Harvard remains true to its mission.

L n 1 I * I 1/1 l_ ;J cnr\i'>c\\ n Harvard's President & Leadership| Harvard University Page 2 of 5

Chartered in 1650, the Corporation exercises fiduciary responsibility with regard to the University's academic, financial, and physical resources and overall well- being. It consists of the President, the Treasurer, and other members known as Fellows. The Corporation is in the process of expanding from seven to thirteen members and elaborating its committee structure, in light of reforms adopted by the governing boards in December 2010. The Corporation engages with both questions of long-range strategy, policy, and planning as well as transactional matters of unusual consequence. It serves as a confidential sounding board for the President on matters of importance; meets with deans, vice presidents, and others from time to time to discuss a wide array of programs and plans; and is responsible for approving the University's budgets, major capital projects, endowment spending, tuition charges, and other matters.

The Board of Overseers is the larger of the two boards, comprising thirty elected members as well as the President and the Treasurer of the University, who serve ex officio. Members are elected by Harvard degree holders other than Corporation members and University officers. Typically, five new Overseers are elected each year to staggered six-year terms, from a slate of eight or more 1 I nominees. Drawing on the wide-ranging experience and expertise of its . members, the Board exerts broad influence over the University's strategic directions, provides counsel to the University leadership on priorities and plans, and has the power of consent to certain actions of the Corporation. The Board's chief functions include superintendence of the visitation process, the principal mechanism for periodic external review of the quality and direction of the University's schools, departments, and selected other programs and activities. The,Board carries out this responsibility largely through the operation of more than fifty visiting committees, whose work is overseen by and reported to the

Board.

• //tirtintr i /oKrti 1 t_V>o rr1 /Ko 1-1/1 rH f_1 co/Hi^rch Irt f^nono\Q President and Fellows (Harvard Corporation)

The oldest corporaiion in the Western Hemisphere is the Har\'ard Corporation, known fonnally as the President and Fellows of Harvard College. It is the smaller of Harvard's two governing boards; the other is the Board of Overseers. Following are the members of the Harvard Corporation.

Lawrence S. Bacow, President

SB '72, MIT

JD '76, MPP '76, PhD "78, Har\'ard

Lawrence S. Bacow took office as Harvard's 29th president on July 1, 2018. For more, please visit Office of the President.

James W. Breyer Fellow (began service in 2013)

BS "83, Stanford

MBA '87, Harvard

More; Brever elected to Harvard Corporation

Kenneth I. Chenault

Fellow (began service in 2014)

BA '73, Bowdoin

JD *76, Harvard

More: Chenault and Mills to loin Harvard Coiporation

Paul J. Finnegan

Fellow (2012-2014)

Treasurer (began service in 2014)

AB'75, MBA'82, Harvard

More: Finnegan elected to Corporation Susan L. Graham

Fellow (began service in 201 1)

AB '64. Harvard

MS'66, PhD'71, Stanford

More; Three to Join Harvard Corporation

William F. Lee

Fellow (began service.in 2010) Senior Fellow (began service in 2014)

AB '72, Harvard

MBA "76, JD'76. Cornell

More: Corporation transitions planned For 2014

Biddy Martin Fellow (began ser\'ice in 2018)

BA '73, College of William and Mar)'

MA '74. Middlebury College

PhD '85. U. of Wisconsin, Madison

More: Haiward Corporation elects two new members

Jessica Tuchman Mathews

Fellow (began serx'ice in 2013)

AB '67, Radcliffe

PhD'73,Caltech

More: Mathews Wells elected

Karen Gordon Milts

Fellow (began service in 2014)

AB'75. MBA'77, Harvard

More: Chenault and Mills to join Har\^ard Corporation Penny Pritzker Fellow (began service in 2018)

AB'81, Harvard

JD'85, MBA'85, Stanford

More: Hars'ard Corporation elects two new members

David M. Rubenstein Fellow (began service in 2017)

BA'70, Duke

JD '73, Chicago

More: New member of Harvard Corporation

Shirley M. Tilghman Fellow (began ser\'ice in 2016)

BSc '68, Queen's U.

PhD'75, Temple U.

LLD (hon.) *04, Harvard

More: Tilshman named to Harvard Corporation

Theodore V. Weils, Jr.

Fellow (began service in 2013)

BA '72, Holy Cross

JD'76, MBA'76, Harvard

More: Malhews Wells elected

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Members of the Board of Overseers are elected by Harvard degree holders. Following are the board's current members, with their terms of.service shown in parentheses:

Geraldine Acuna-Sunshine (2018-2024) Boston, MA President, Sunshine Care Foundation for Neurological Care and Research

Michael Brown (2014-2020) Boston, MA CEO and Co-Founder, City Year

P. Lindsay Chase-Lansdale (2016-2022) Evanston, IL Frances Willard Professor of Human Development and Social Policy and Associate Provost for Faculty, Northwestern University

Alice Hm Chen (2019-2025) 5an Francisco, CA Chief Medical Officer, San Francisco Health Network; Professor of Medicine, University of California, San Francisco Board of Overseers| Harvard University Page 2 of 8

R. Martin Chavez(2015-2021) New York, NY Vice Chairman and Global Co-Head of the Securities Division, The Goldman Sachs Group, Inc.

Paul L. Choi(2017-2023) Chicago, IL Partner, Sidley Austin LLP

Philip Hart Cullom (2018-2024) I Gaithersburg, MD Vice Admiral (retired), U.S. Navy

Darienne B. Driver (2017-2023) Milwaukee, Wl President and CEO, United Way for Southeastern Michigan

Fernande R. V. Duffly (2015-2021) Cambridge, MA Former Associate Justice, Massachusetts Supreme Judicial Court

Janet Echelman (2019-2023) Brookline,MA Visual Artist

Helena Buonanno Foulkes (2016-2022) New York, NY Chief Executive Officer, Hudson's Bay Company

Brian Greene (2015,-2021) New York, NY

Um.— //..-..... I J/1 ! • /I Board of Overseers| Harvard University Page 3 of 8

Professor of Physics, Professor of Mathematics, and Director, Center for Theoretical Physics, Columbia University

Carla Harris(2017-2023) New York, NY Vice Chair of Wealth Management, Senior Client Advisor and Managing Director, Morgan Stanley

Meredith "Max" Hodges (2018-2024) Boston, MA Executive Director, Boston Ballet

Marilyn Holifield (2018-2024) Mjomi, FL Partner, Holland & Knight LLP

Vivian Hunt(2019-2025) London, England Managing Partner, McKinsey & Company, United Kingdom

Tyler Jacks (2019^2025) Cambridge, MA Koch Professor of Biology, Massachusetts Institute of Technology; and Director, Koch Institute for Integrative Cancer Research

Ketanji Brown Jackson (2016-2022) Washington, DC Judge, U.S. District Court for the District of Columbia

Beth Y. Karlan (2015-2021) Los Angeles, CA •Board of Overseers| Harvard University Page 4 of 8

Professor of Obstetrics and Gynecology, David Geffen School of Medicine, and Director of Cancer Population Genetics, University of California at Los Angeles

John B. King, Jr.(2019-2025) Washington^ DC CEO, The Education Trust

Michael M. Lynton (2012-2020) New York, NY Chairrnan, Snap Inc.

Alejandro Ramirez Magana (2016-2022) Mexico City, Mexico CEO, Cinepolis

Diego A. Rodriguez(2018-2020) Palo Alto, CA Executive Vice President, Chief Product and Design Officer, Intuit Inc.

Lesley Friedman Rosenthal(201A-2020) ; New York, NY Chief Operating Officer and Corporate Secretary, The Juilliard School

Yvette Roubideaux (2018-2024) Washington, DC Director, Policy Research Center, National Congress of American Indians

Leslie P. Tolbert(2017-2023) Tucson, AZ Regents' Professor Emerita, Department of Neuroscience, University of Arizona

' A *A /\ t /\ Board of Overseers I Harvard University ■ Page 5 of 8

Reshma Saujani (2019-2025) New York, NY Founder and CEO, Girls Who Code

Kent Walker (2016-2022) Mounioin View, CA Senior Vice President, Global Affairs, and Chief Legal Officer, Google LLC

John Silvanus Wilson, Jr.(2015-2021) - on leave Cambridge, MA Former President, Morehouse College

Ryan Wise (2019-2020) Des Momes,Iowa Director, Iowa Department of Education

Lawrence S. Bacow President, Harvard University Ex officio

Paul J. Finnegan Treasurer, Harvard University Ex officio

Get the latest Harvard Gazette news delivered to I your Inbox. Mission, Vision, and History| Harvard College Page 1 of 3

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V

Mission, Vision, and History

>«v; n

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Mission

The mission of Harvard College is to educate the citizens and citizen-leaders for our society. We do this through our commitment to the transformative power of a liberal arts and sciences education.

Beginning in the classroom with exposure to new ideas, new ways of understanding, and new ways of knowing, students embark on a journey of intellectual transformation. Through a diverse living environment, where students live with people who are studying different topics, who come from different walks of life and have evoking identities, intellectual transformation is deepened and conditions for social transformation are created. From this we hope that students will begin to fashion their lives by gaining a sense of what they want to do with their gifts and talents, assessing their values and interests, and learning how they can best serve the world. Mission, Vision, and History| Harvard College Page 2 of 3

Vision

Harvard College will set the standard for residential liberal arts and sciences education in the twenty-first century. We are committed to creating and sustaining the conditions that enable all Harvard College students to experience an unparalleled educational journey that is intellectually, socially, and personally transformative.

A Brief History When you attend Harvard College, you become a part of the rich, storied history of the nation s oldest institutions of higher learning. Founded in 1636, Har\'ard has undergone countless changes over the centuries, yet has always maintained its core as a haven for the world's most ambitious scholars.

Academics

Harvard was founded in 1636 and named for its first donor, the Reverend John Har\'ard.

Read more ►

Fm 1 Buildings Many of Harvard's historic buildings, several of which date back to the 18th century, still stand today.

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Diversity and Accessibility

The 20th century saw substantial efforts to open Harvard's doors to an increasingly- broad range of students. Harvard Kennedy School Government Performance Lab

Kev Personnel

Name Job Title Jeffrey Liebman Professor and Director Scott Kleiman Program Director Jessica Lanney Project Leader April 2018 JEFFREY B. LIEBMAN

Address: John F. Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 telephone: (617)495-8518 email: [email protected] web: https://sites.hks.harvard.edu/jeffreyliebman/

Current Positions; Malcolm Wiener Professor of Public Policy, Kennedy School of Government, Harvard University, 2006-present. Director, Taubman Center for State and Local Government, 2015-present. Director, Rappaport Institute for Greater Boston, 2015-present. Founder and Director, Harvard Kennedy School Government Performance Lab, 20il-present. Research Associate, National Bureau of Economic Research, 2005-present. Co-organizer, NBER Working Group on Social Security. Associate Director, NBER Retirement Research Center and NBER Disability Research Center, 2011 -2015.

Previous Positions: Acting Deputy Director, Office of Management and Budget, 2010. Executive Associate Director and Chief Economist, Office of Management and Budget, 2009. Special Assistant to the President for Economic Policy, White House National Economic Couhcil, 1998-1999. Assistant Professor of Public Policy, Kennedy School of Government, Harvard University, 1996-2001. Associate Professor of Public Policy, Kennedy School of Government, Harvard University, 2001-2005. Professor of Public Policy, Kennedy School of Government, Harvard University, 2005-2006. Faculty Research Fellow, National Bureau of Economic Research, 1996-2005. Harvard Kennedy School Area Chair for Social Policy, 2005-2007. Director, Harvard University Multidisciplinary Program in Inequality and Social Policy, 2005-2007.

Education: Ph.D., Economics, 1996 Harvard University B.A. magna cum laude, distinction in Economics and Political Science, 1989 Yale University

Honors and Fellowships: Elected to National Academy of Social Insurance, 2002. NBER Center for Aging, Demography Research Fellow, 2001-2002. Alfred P. Sloan Foundation Doctoral Dissertation Fellowship, 1995-1996. Tinker Foundation Fellowship for research in Mexico, summer 1992. National Science Foundation Graduate Fellowship, 1991-1994. Yale University, Ronald Meltzer Economics Award for the outstanding senior essay in major, 1989.

Research Grants: Bloomberg Philanthropies grant to fund Government Performance Lab work on results-driven contracting, 2015- 2021. John and Laura Arnold Foundation grants to fund Government Performance Lab 2013-2020. Rockefeller Foundation grant to expand Social Impact Bond Technical Assistance Lab, 2012-2015. Dunham Fund grant to expand Social Impact Bond Technical Assistance Lab, 2013-2015. Smith Richardson Foundation grant for "Building an Evidence Base for Disability'Insurance Refonn"(with Jack Smalligan), 2012-2013. Rockefeller Foundation grant to establish a "Social Impact Bond Technical Assistance Lab," 2011-2013. National Institutes of Health (NIA),"Building Integrated Models of Retirement: Three Approaches," 2007-2012. NBER-SSA Retirement Research Center grant for "The Taxation of Social Security Benefits as an Approach to Means Testing," 2007-2008. NBER-SSA Retirement Research Center grant for "The Perception of Social Security Incentives for Labor Supply and Retirement" (with Erzo Luttmer), 2007-2008. NBER-SSA Retirement Research Center grant for "Labor Supply Responses to the Social Security Tax-Benefit Link"(with Erzo Luttmer), 2006-2007. NBER-SSA Retirement Research Center grant for "How Should Changes in Population Health Affect Retirement Ages?" (with David Cutler), 2006-2007. NBER-SSA Retirement Research Center grant for "Could Social Security Eliminate Poverty Among the Elderly?", 2005-2006. NBER-SSA Retirement Research Center grant for "Earnings Responses to Raising the Social Security Taxable Maximum?"(with Emmanuel Saez), 2004-2005. NBER-SSA Retirement Research Center grant for "How Fast Should the Social Security Retirement Age Rise?" (with David Cutler), 2003-2004. National Institutes of Health (NIA) First Award for "Protecting the Poor While Reforming Social Security," 1999- 2004. Russell Sage Foundation Grant for "Reforming Tax and Transfer Programs in Order to Assist Low-skilled Workers," 1997-2000. National Institute of Child Health and Human Development grant for "Effects of High-Poverty Neighborhoods on Youth"(with Lawrence Katz and Jeffrey Kling), 2001-2004. Russell Sage Foundation grant for "Effects of High-Poverty Neighborhoods on Youth"(with Lawrence Katz and Jeffrey Kling), 2000-2006. Smith Richardson Foundation grant for "Effects of High-Poverty Neighborhoods on Youth"(with Lawrence Katz and Jeffrey Kling), 2000-2003. William T. Grant Foundation grant for "Effects of High-Poverty Neighborhoods on Youth"(with Lawrence Katz and Jeffrey Kling), 2001-2004. MacArthur Foundation grant for "Moving to Opportunity and Family Well-being"(with Lawrence Katz, Jeffrey Kling, Jeanne Brooks-Gunn, and Greg Duncan), 2001-2002. Robert Wood Johnson Foundation grant for "Moving to Opportunity and Family Well-being"(with Lawrence Katz, Jeffrey Kling, Jeanne Brooks-Gunn, and Greg Duncan), 2001-2002. U.S. Department of Housing and Urban Development grant for "Expanding Moving to Opportunity Research" (with Lawrence Katz and Jeffrey Kling), 2000-2006. US Department of Housing and Urban Development grant, 1995-2000, for "Moving to Opportunity in Boston" (with Lawrence Katz and Jeffrey Kling). NBER-NIA Center for Aging and Health Research grant for "Health Outcomes in MTO"(with Lawrence Katz and Jeffrey Kling), 1997-1998.

Journal Articles and Book Chapters:

Research on Housing Policy and Neighborhood Ejfects

\. "Moving to Opportunity in Boston: Early Outcomes of a Housing Mobility Program"(with Lawrence Katz and Jeffrey Kling), Quarterly Journal ofEconomics, May 2001. 2. "Boston Site Findings: The Early Impacts of Moving to Opportunity"(with Lawrence Katz and Jeffrey Kling), in Choosing a Better Life? Evaluating the Moving to Opportunity Social Experiment, edited by John M. Goering and Judith D. Feins (Washington: Urban Institute Press), 2003.

3. "Bullets Don't Got No Name: Consequences of Fear in the Ghetto" (with Lawrence Katz and Jeffrey Kling), in Discovering Successful Pathways in Children's Development: New Methods in the Study of Childhood and Family Life, edited by Thomas S. Weisner (Chicago: University of Chicago Press), 2004.

4. "Experimental Analysis of Neighborhood Effects" (with Jeffrey Kling and Lawrence Katz), Econometrica, January 2007.

5. "What Can We Learn About Neighborhood Effects from the Moving to Opportunity Experiment?" (with Jens Ludwig, Jeffrey Kling, Greg Duncan, Larry Katz, Ronald Kessler, and Lisa Sanbonmatsu), American Journal ofSociology, \ 14, July 2008.

Research on Executive Compensation

5. "Are CEOs Really Paid Like Bureaucrats?" (with Brian Hall), Quarterly Journal ofEconomics, August 1998.

6. "Taxation and Executive Compensation"(with Brian Hall), Tax Policy and the Economy, 14, 2000.

Research on the Earned Income Tax Credit

7. "Labor Supply Response to the Earned Income Tax Credit" (with Nada Eissa), Quarterly Journal of Economics, May 1996. Reprinted in Alan Auerbach, editor. Public Finance, Worth Series in Outstanding Contributions, 2000.

8. "The Impact of the Earned Income Tax Credit on''Incentives and Income Distribution," Tax Policy and the Economy, 12, 1998.

9. "Who are the Ineligible Earned Income Tax Credit Recipients?" National Tclx Journal, December 2000.

10. "The Optimal Design of the Earned Income Tax Credit," in Making Work Pay: The Earned Income Tax Credit and Its Impact on American Families, edited by Bruce D. Meyer and Douglas Holtz-Eakin (New York: Russell Sage Foundation Press), 2002.

11. "The EITC Abroad: Implications of the British WFTC for Pay-as-you-eam Administration of the EITC," (with Janet Holtzblatt), Proceedings ofthe National Tax Association, 1999.

12. "Would People Behave Differently If They Better Understood Social Security? Evidence from a Field Experiment"(with Erzo Luttmer), American Economic Journal: Economic Policy, 7(1), 2015.

Research on Social Security and Social Security Reform

13. "The Perception of Social Security Incentives for Labor Supply and Retirement: The Median Voter Knows

3 More than You'd Think"(with Erzo Luttmer), Tar Policy and the Economy, 26, 2012.

14. "Labor Supply Responses to Marginal Social Security Benefits: Evidence from Discontinuities"(with Erzo Luttmer and David SeiO, Journal ofPublic Economics, 93, December 2009.

15. "Redistribution in the Current U.S. Social Security System," in The Distributional Aspects ofSocial Security and Social Security Reform, edited by Martin Feldstein and Jeffrey B. Liebman (Chicago: University of Chicago Press), 2002.

16. "The Distributional Effects of an Investment-based Social Security System"(with Martin Feldstein), in The Distributional Aspects ofSocial Security and Social Security Reform, edited by Martin Feldstein and Jeffrey B. Liebman (Chicago: University of Chicago Press), 2002.

17. "Social Security" (with Martin Feldstein), in Handbook ofPublic Economics, edited by Alan J. Auerbach and Martin Feldstein (Amsterdam: Elsevier), volume 4, 2002.

Research on Tax and Budget Policy

18. "Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement"(with Neale Mahoney), American Economic Review, 107(1 1), 2017.

V 19. "Social Security and National Saving in an Era of Budget Surpluses"(with Douglas Elmendorf), Brookings Papers on Economic Activity, 2, 2000.

20. "TTie Middle Class Parent Penalty: Child Benefits in the U.S. Tax Code"(with David Ellwood), Tax Policy and the Economy. 15, 200).

21. "Fiscal Policy and Social Security Policy During the 1990s" (with Douglas Elmendorf and David Wilcox), in American Economic Policy in the 1990s, edited by Jeffrey Frankel and Peter Orszag (Cambridge: MIT Press), 2002.

22. "Saving Incentives for Low- and Middle-income Families: Evidence from a Field Experiment with H&R Block (with Esther Duflo, William Gale, Peter Orszag, and Emmanuel Saez), Quarterly Journal of Economics, November 2006.

23. "Simple Humans, Complex Insurance, Subtle Subsidies"(with Richard Zeckhauser), in Using Taxes to Reform Health Insurance: Pitfalls and Promises, edited by Henry Aaron and Leonard Burman (Washington, Brookings Institution), 2008.

24. "The Deterioration in the U.S. Fiscal Outlook, 2001-2010," Tclx Policy and the Economy, 27, 2013.

25. Forthcoming: "The Decline, Rebound, and Further Rise in SNAP Enrollment: Disentangling Business Cycle Fluctuations and Policy Changes" (with Peter Ganong), American Economic Journal: Economic Policy.

Working Papers:

26. "How Fast Should the Social Security Eligibility Age Rise?"(with David Cutler, Seamus Smyth, and Mark I Shepard). 27. "Earnings Responses to Increases in Payroll Taxes"(with Emmanuel Saez).

28. "Schmeduling"(with Richard Zeckhauser).

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Books Edited:

Distributional Aspects ofSocial Security and Social Security Reform (with Martin Feldstein),(Chicago: University of Chicago Press), 2002.

Social Security Policy in a Changing Environment (with David Wise and Jeffrey Brown),(Chicago: University of "Chicago Press), 2009.

Other Writings:

Social Impact Bonds: A Guidefor State and Local Governments (with Alina Sellman), Harvard SIB Lab, June 2013.

Building on Recent Advances in Evidence-Based Policymaking. Brookings Hamilton Project and America Achieves, April 2013.

"An Evidence-Based Path to Disability Insurance Reform"(with Jack Smalligan) in 15 fVays to Rethink the Federal Budget, Brookings Hamilton Project, February 2013.

"Social Impact Bonds: Lessons Learned So Far"(with SIB Lab team) in Community Development Investment Review, Federal Reserve Bank of San Francisco, February 2013.

"The Baby Boom Bump"(with Kenneth Baer), New York Times, December 6, 2012.

"The End of Health Insurance Companies" (with Ezekiel Emanuel), New York Times Opinionator. January 30, 2012.

"Cut Medicare, Help Patients" (with Ezekiel Emanuel), New York Times, August 22, 2011.

Social Impact Bonds: A Promising New Financing Model to Accelerate Social Innovation and Improve Government Performance, Center for American Progress, February 2011.

"Social Security Meets Race," Science, September 23, 2005, p. 1965.

"Reforming Social Security: Not All Privatization Schemes Are Created Equal." Han'ard Magazine, March-April, 2005.

Moving to Opportunity: Interim Impacts Evaluation (with Larry Orr, Judith Feins, Robin Jacob, Erik Beecroff, Lisa Sanbonmatsu, Jeffrey Kling, and Lawrence Katz). Washington D.C.: U.S. Department of Housing and Urban Development, 2003.

The Role ofAnnuities in a Reformed U.S. Social Security System. December 2002. AARP Public Policy Institute report 2002-17. ' "Is Social Security Unfair to the Poor?" Op-ed, Washington Post, July 29, 2001.

"Personal Accounts and Social Security," Letter to the Editor, Washington Post, July 9, 2001.

"The Earned Income Tax Credit." Testimony provided to the Committee on Finance, United States Senate, Washington, D.C., March 7, 2001.

"The EITC Compliance Problem," Poverty Research News, Summer 1998, Joint Center for Poverty Research.

"Tax Credit Combines Best ofTwo Systems," Op-ed, Financial Times, March 17, 1998.

"Blair Could Learn From US Tax Credit Scheme," Letter to the Editor, Financial Times, June 23, 1997.

Lessons About Tax-benefit Integration from the US Earned Income Tax Credit Experience. Joseph Rownlree Foundation. York, England. 1997.

Teaching: Public Economics(PhD field course). Harvard Economics Department. 2006, 2007, 2008, 2011. Economic Analysis of Public Policy (public finance), Han'ard Kennedy School. 1997, 2000, 2001, 2003, 2004, 2005, 2008, 2011, 2012, 2014, 2015, 2016, 2017, 2018. Government Turnarounds, Harvard Kennedy School. 2017. Empirical Methods 11 (regression analysis and program evaluation), Harvard Kennedy School. 1997, 1998. Tax and Budget Policy, Harvard Kennedy School. 2000. Doctoral Research Seminar, Harvard Kennedy School. 2000, 2001. American Economic Policy, Harvard Economics Department (undergraduate) and Harvard Kennedy School. 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2011, 2012, 2013, 2014, 2015, 2016, 2017. New Members of Congress Program (presentations on Social Security and Medicare and economic outlook). 2000, 2002, 2012. Proseminar on Inequality and Social Policy (PhD students). Harvard Department of Sociology and Harvard Kennedy School. 2005, 2007, 2010. SCOTT KLEIMAN

EXPERIENCE HARVARD KENNEDY SCHOOL GOVERNMENT PERFORMANCE LAB(2013-PRESENT) Cambridge, MA Program Director (2017-present), Assistant Director (2015-2017), Innovation Fellow (2013-2015) • Directed 18+ technical assistance performance improvement projects, including: o Advising a state redesign and procurement of behavioral health, parenting supports, and child placement programs for a state child welfare agency, o Advising a state on implementation and scaling of data-driven provider performance management strategies at public health, behavioral health, child welfare, and workforce agencies, o Advising a state on an interagency partnership between a departments of public health and child welfare to reduce child abuse fatalities. o Advising a state on a public-private partnership to improve transitions to adulthood for justice-involved foster youth. • Co-created and delivered outcomes-based management training to 100+ senior government officials. • Authored external publications, including flagship performance improvement playbook for leaders of public child welfare agencies, a Harvard Kennedy School teaching case, and a data analytics curriculum and simulation. • Served on senior leadership team during growth from a 10-person start-up to an established organization of40+ staff. • Senior Fellow with Casey Family Programs. Advisory committee member for Results for America's Invest in What Works State Standard of Excellence. Regular guest lecturer in HKS course on government turnarounds.

BAIN & COMPANY (2012) Atlanta, OA Summer Associate • Diagnosed potential cost savings associated with long-term transportation infrastructure needs for major U.S. city.

CERES (2007-2011) Boston, MA ^ Manager, Executive and Org. Advancement(2010-2011), Exec. Associate/Fellow (2007-2010) • Led cross-organizational team to craft framework for strategic business plan. • Facilitated revamp of bylaws, board policies, and governance practices. • Coordinated CEO's office and senior management team.

EDUCATION DUKE UNIVERSITY, FUQUA SCHOOL OF BUSINESS Durham, NC MBA. May 2013.

MIDDLEBURY COLLEGE Middlebury, VT BA, Political Science, May 2006. Jessica Lanney

Experience 2017-19 GOVERNMENT PERFORMANCE LAB, HARVARD KENNEDY SCHOOL Concord, NH Project Leader • Supporting NH DCYF to design and implement strategies to support child welfare system transformation ^ • Launched GPL's multi-year work in Chicago helping the city's human services agency (Dept. of Family & Support Services) overhaul its approach to procurement and contract management to improve human service outcomes. Responsibilities included developing near- and long-term strategy, day-to-day project and team management, capacity and relationship-building

2012-17 THE BRIDGESPAN GROUP Boston, MA Case Team Leader (2016-17) Managed project teams providing management consulting to large nonprofits and foundations to support strategic decision- making and organizational change. Accountable for analysis, deliverables, workflow processes, and stafTdevelopment. Balanced competing priorities and deadlines while collaborating closely with clients and stakeholders. • Developed major capacity building initiative for large nonprofit federation to strengthen local chapters and increase collaboration among chapters nationally • Helped lead Bridgespan's multi-year initiative to improve nonprofit funding approaches and work with large nonprofit networks

Consultant(2015-16) • Worked with major foundation's senior leaders on change management/implementation of new strategy • Created fund strategy and investment framework for impact investing fund • Co-authored articles on network strategy shifts In Stanford Social Innovation Review, Harvard Business Review

Senior Associate Consultant (2014-15) and Associate Consultant(2012-13) • Designed and conducted portfolio analysis global foundation to recommend new policies, grantee relationship and portfolio management approaches • Redesigned organization structure, cross-team, innovation processes for large affordable housing organization • Developed turnaround plan for rural human services provider struggling with sustainability to improve fundraising, efficiency, and HQ services to local sites • Identified key levers to expand service reach at minimal cost for home visitation program

2009 BOSTON HEALTH CARE FOR THE HOMELESS PROGRAM Boston, MA Housing Intern: Researched effects of housing interventions on health outcomes for chronically homeless patients.

2008 CITY OF NEW ORLEANS-OFFICE OF RECOVERY & DEVELOPMENT New Orleans, LA Policy Intern: Advised on CDBG-funded program to provide low-interest loans to retailers to increase fresh food access in low-income neighborhoods affected by Hurricane Katrina.

2007 OFFICE OF NEW HAMPSHIRE GOVERNOR JOHN LYNCH Concord, NH Summer Intern: Conducted research on emergency public health laws and supported citizen services office.

Education 2010-12 LONDON SCHOOL OF ECONOMICS London, UK Marshall Scholarship for graduate education awarded by UK government. Completed Uvo master's degrees: • MSc in Regional and Urban Planning: graduated with distinction, awarded prize for best overall performance. • MSc in Social Policy and Planning: graduated with distinction, awarded prize for the best dissertation.

2006-10 PRINCETON UNIVERSITY Princeton, NJ AB in Public Affairs at Woodrow Wilson School of Public & International Affairs: graduated sumnta cum laude. Phi Beta Kappa. Prize for the Wilson School's best undergraduate thesis.